South Africa’s department of mineral resources & energy has finally published schedule 2 of the Electricity Regulation Act, which will enable private entities to generate up to 100MW of “distributed”, or self-generated, electricity without having to apply for a licence.
Importantly, the schedule addresses “wheeling” — conveying electricity from the point of connection to the point of consumption via a third-party transmission or distribution network.
The point of connection refers to the electrical node on a distribution or transmission system where a customer’s assets are physically connected to the licensed distributor’s or transmitter’s assets.
The extent to which producers will be able to distribute electricity using the national grid and the costs for doing so are important factors for producers that want to establish the business case for distributed generation.
South Africa’s Photovoltaic Industry Association COO Niveshen Govender said the mention of wheeling was a positive aspect of the schedule.
“The schedule has removed reference to the ‘single customer’ and focused on ‘an end-user customer’, which could allow for interpretation from a singular to multiple.
“Third-party generation has been recognised with regards to a legal entity that may be an embedded generator, who may contract with a distributor and then apply wheeling,” he said.
But he said a lack of comprehensive definitions would create unnecessary ambiguity.
The schedule also raised more questions of clarity regarding self-generation, the application of wheeling and trading, and how the inclusion of energy storage to generation projects will affect the requirements.
The new schedule 2 has been keenly awaited by business because it will accelerate the building of distributed generation by multiple producers.
The notice stipulates that, though operations generating 100MW of electricity will not have to be licensed, they will have to comply with the code and other authorisations and must be registered with the National Energy Regulator.
When announcing that the cap on licensing would be increased from the government’s initial 10MW proposal, President Cyril Ramaphosa said the change would be gazetted within 60 days.
The announcement was widely hailed as a clear signal that reforms to improve the economy’s competitiveness were gaining ground.
It is also a victory for Operation Vulindlela, an initiative of the presidency and the Treasury that is overseen by deputy finance minister David Masondo, and reports directly to Ramaphosa.
The 100MW licensing exemption is viewed as a critical measure to boost supply to the national grid and relieve South Africa’s power shortage.
Allowing embedded generation to thrive has been a central request from organised business for at least the past three years.
However, minister of mineral resources & energy Gwede Mantashe had resisted raising the cap.