New regulations to bolster adoption of alternative energy solutions

Given how much load-shedding has impacted businesses, the government’s new proposed embedded energy generation regulations will come as a welcome relief to those looking to shift to alternative energy solutions.

The updated power licensing requirements, which were published by Minister of Mineral Resources and Energy Gwede Mantashe, raise the barrier for private energy generation from 1 megawatt (MW) to 10 megawatts (MW).

The change follows President Cyril Ramaphosa’s announcement earlier this year in his State of the Nation address that the government was looking at increasing the maximum allowed capacity for small-scale power generation projects. The goal is to help alleviate the electricity-generation challenges faced by the state-owned power utility, Eskom.

In his speech, Ramaphosa recognised the benefit of adding additional support to the national power grid. He said research indicates that relaxing restrictions around new embedded generation projects could produce as much as 5,000MW of additional capacity. This is a small step toward solving South Africa’s load shedding problem.

“We will therefore amend Schedule 2 of the Electricity Regulation Act within the next three months to increase the licensing threshold for embedded generation,” Ramaphosa pledged at the time.

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Under current law, entities wishing to generate their own electricity at a capacity of more than 1MW, must register and get a licence from the National Energy Regulator of South Africa (NERSA). The new regulation creates an exemption for those aiming for a generation capacity of up to 10MW to obtain a license, however, they must still register with NERSA.

These licensing requirements have been holding back businesses that want to use solar solutions as backup power or the main supply source to reduce their dependence on Eskom’s power grid.

While businesses will see the move as a big win, power experts and analysts believe it’s not enough to make a significant difference. Some local experts have said the threshold should be capped at 50MW, considering the seriousness of the power constraints and the fact that many companies want to generate more than 10MW. 

The new regulation allows Solar PV companies in the private sector the opportunity to make a bigger contribution to the nation’s electricity demand which will have a positive effect on the economy.