Business has welcomed President Cyril Ramaphosa's surprise announcement opening the way for companies to generate their own electricity up to 100MW, but will wait to see whether a reluctant mineral resources & energy minister, Gwede Mantashe, will deliver on the initiative when he publishes the amendments to the legislation within the next 60 days.
Organised business bodies had been lobbying for more than two years for the limit on embedded generation, now at 1MW, to be raised to 50MW to make it easier and faster for companies to invest in their own power plants, as many are keen to do to reduce the impact of load-shedding on their operations and to move to cleaner energy sources.
Ramaphosa has exceeded their expectations, more than nine months after he promised in his October economic recovery and reconstruction plan to make a secure supply of electricity a priority. But Mantashe, who said on Thursday the president had "twisted my arm", will need to change legislation to simplify and accelerate the process.
More than 5,000MW of new capacity could come on to the grid - more than a Medupi or Kusile - in the next couple of years if the cumbersome and lengthy licensing requirements are liberalised. That would close the energy gap and take some of the pressure off Eskom, as well as attract substantial new private sector investment and create new jobs.
Eskom CEO André de Ruyter has been supportive of lifting the licence requirement. Companies will, however, need Eskom and its regulator to ensure decent prices for them to transport their power across the national grid, which Eskom owns, because some may generate the power in a different place from their operations to take advantage of good solar or wind resources, for example.
Many will also need to be able to sell surplus power they generate to other companies, or to Eskom, to make their projects
viable, and though Ramaphosa said on Thursday this would be allowed, the legislative amendments from Mantashe's department will need to be drafted to enable this.
Though he had agreed earlier this year to lift the limit to 10MW, the draft legislative amendments his department issued met with widespread criticism.
Though companies would not need to apply to the National Energy Regulator of SA (Nersa) for a licence, they would still need to meet the technical requirements for connecting to the national power grid, and would need to register their projects with Nersa, processes which the department will also have to ensure are seamless if projects are to come on to the grid swiftly, boosting the capacity of the power system and helping to keep the lights on for SA.
Many of SA's largest energy users, especially the big mining and industrial companies, have plans for their own power plants, mostly solar photovoltaic (PV) and wind, but there are also many companies contemplating smaller projects, on the rooftops of warehouses and shopping centres.
The Minerals Council SA welcomed Ramaphosa's announcement, saying it would "work closely with the department of mineral resources & energy and Eskom to ensure that from this excellent starting point we can rapidly bring to fruition at least 1.6GW, largely renewable and private sector-funded embedded generation projects that are already being planned by mining companies".
Already Gold Fields has obtained a licence for a 40MW power plant at its South Deep mine, a process which reportedly took four years. Companies such as BMW and Amazon are also installing their own "green" power.
Sibanye-Stillwater, one of Eskom's five largest customers, has received approval from Nersa for the first 50MW module, but will need to be able to sell the power to the group's platinum operations once the gold operations close in 13 years' time. Sibanye is also looking at a 200MW modular solar plant in the Cape and a 250MW wind farm, spokesperson James Wellsted said.
Anglo American Platinum has several pilot projects in the pipeline, including a planned 75MW solar PV project at its Mogalakwena mine, which should be operational by the second quarter of 2023, subject to the required approvals, said spokesperson Jana Marais, who said the president's announcement was "a positive step in solving SA's energy crisis".
In a letter last week to Mantashe, which Business Times has seen, Business Leadership SA (BLSA) said enabling embedded generation through lifting the electricity licensing threshold to 50MW would create up to 16,000 direct jobs per year and result in R75bn-R85bn of investment.
It cited recent analysis by Meridian Economics that showed increasing the licensing exemption to 50MW had the potential to unlock up to 5,000MW of additional capacity over four to five years. Conversely, BLSA said load-shedding was estimated to cost the economy R80bn-R160bn in 2020 and continued to impede the economic recovery.
Business Unity SA (Busa) urged that the legislative amendments be published within 30 days to expedite projects.
"This is a decision that should have been taken by the department some time 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 would significantly increase confidence, attract investment and enable economic growth," said BUSA CEO Cas Coovadia.
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