SA’s more “liberal approach” to energy supply praised

President Cyril Ramaphosa

By Janice Roberts, Editor, MoneyMarketing

In a surprise announcement at midday today, President Cyril Ramaphosa announced that Schedule 2 of the Electricity Regulation Act would be amended to increase the NERSA licensing threshold for embedded generation projects from 1 MW to 100 MW.

“This intervention reflects our determination to take the necessary action to achieve energy security and reduce the impact of load shedding on businesses and households across the country,” Ramaphosa said.

Embedded generation – when companies produce electricity for their own use – is seen by many as a sustainable way to provide much needed additional capacity to the electricity system.

NWU economist, Professor Raymond Parsons described today’s announcement as a more “liberal approach” to energy supply in the country that is good for investment sentiment at a time when SA needs to take full advantage of the current economic recovery.

Peter Attard Montalto, Head of Capital Markets Research at Intellidex, said that he thought Ramaphosa had had a “sod it” moment “and shifted the dial – in the midst of loadshedding of level four yesterday – on energy liberalisation.” He added that there had been  “a long build-up of pressure on this issue in the past two years, and Minister Gwede Mantashe had become increasingly stuck in the mud – even announcing that the threshold would only rise to 10MW whilst a public consultation was ongoing.”

According to Parsons, the government now recognizes the extent to which the failure of Eskom to guarantee electricity supply has posed the most serious risks to the SA economy. “The right solutions have for some time required much more flexible energy policies. The increased flexibility now given to the electricity generation licensing threshold by raising it to 100MW is therefore an upside surprise which is potentially favourable for investment and growth.”  

Business Unity South Africa (BUSA) has welcomed today’s announcement by President Ramaphosa. “This amendment will go a long way to unlocking embedded generation to enable security of supply, investment, and growth,” it said, adding it believes that upwards of 16 000 direct jobs can be created (based on a 50MW threshold). “Job creation is likely to be significantly higher based on 100MW,” BUSA added.

While Ramaphosa’s announcement has been praised, BUSA believes that every day of delay and load shedding adds to the country’s  economic pressures and the organisation urged government to publish this amendment within 30-days of the announcement to expedite projects.

“We welcome the decisiveness demonstrated by President Ramaphosa in this area. This is a decision that should have been taken by rhe Department of Mineral Resources and Energy sometime ago, but the announcement by the President is, we hope, the beginning of a trend where the President will act decisively to unblock numerous blockages in delivery that, if unlocked, would significantly increase confidence, and attract investment and enable economic growth.”

Meanwhile, the federation of agricultural organisations, AgriSA, says today’s announcement opens a significant door for private electricity generation.

“This is particularly encouraging as it will allow for renewable energy and new parties to get involved,” Kulani Siweya, Agri SA agricultural economist said.

“At a time when load-shedding haunts the economy, this intervention is greatly needed to address the supply constraints. Agri SA has always maintained that the private sector’s involvement and participation would alleviate pressure from Eskom. The announcement reinforces that President Ramaphosa listens to the free-market economy and furthermore understands and recognises the importance and opportunities that are presented in the involvement of the private sector.

“While this will aid in providing electricity in an economic viable way, we further reiterate the urgent need for any administrative hurdles to be addressed within Eskom’s structures”

Siweya added that it is important that Eskom views today’s announcement as an opportunity to partner with independent providers in getting back to supplying stable and reliable energy to the country.

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