South Africa's private electricity production threshold increased

South African President Cyril Ramaphosa announced on Thursday, 10 June 2021, that South Africa’s private electricity production threshold increased from 1 MW to 100 MW to combat the country’s electricity shortage.  

The increase would be facilitated by an amendment to Schedule 2 of the Electricity Regulation Act “within the next 60 days or sooner”. It was further stated that the intervention reflected the government’s determination to take the necessary action to achieve energy security and reduce the impact of load-shedding on businesses and households across the country.

The reform is further expected to unlock significant investment in new generation capacity in the short and medium-term, enabling companies to build their own generation facilities to supply their energy needs. It was also confirmed that any plants developed to power mines, factories and farms would also be allowed to wheel electricity through municipal and Eskom networks and sell surplus electricity to nonrelated buyers.

It is important to note that generation projects would still need to obtain a grid-connection permit, undertake environmental impact assessments, and register with Nersa, which would “verify that they have met these requirements” and provide authorisation for the plants to operate. “Municipalities will have the discretion to approve grid-connection applications in their networks, based on an assessment of the impact on their grid,” Ramaphosa added.

The president further stressed that the country’s ability to address the energy shortage swiftly and comprehensively would determine the pace of South Africa’s economic recovery. “Resolving the energy supply shortfall and reducing the risk of load-shedding is our single most important objective in reviving economic growth,”

The announcement that South Africa’s private electricity production threshold increased, was applauded by multiple industries and associations who had the following to say:

The Minerals Council South Africa immediately welcomed the announcement and said it was committed to working towards ensuring that a minimum of 1.6 GW additional power of mostly renewables capacity could “rapidly” be introduced to South Africa’s power grid. “Our initial estimates are that this development could lead to additional short and medium-term investment by the industry solely in embedded generation projects of around R27-billion,” the council said in a statement.

Business Unity South Africa (BUSA) predicted that the increased power threshold could result in upwards of 16 000 direct jobs being created.

Agricultural Industry representative said, “the announcement that companies can now generate up to 100 MW is a timely boost for business confidence as it will unlock large investments into renewable energy and allow businesses to secure their energy needs”.

South African Independent Power Producer Association alsoindicated that a recent survey of its members showed that there were at least 18 projects ready for finalisation and execution. “We are encouraged by the President’s recognition of the need for ‘bold and urgent action’. Further, government ‘remaining agile and willing to adapt’ are attributes that are needed in the fast-changing energy needs of South Africa”.

The Congress of South African Trade Unions (Cosatu) said it hoped that the announcement would spur investment in additional energy generation, noting that the lack of reliable and affordable energy threatened millions of jobs.

North West University’s Business School added that the more liberal approach to energy supply in South Africa was good for investment sentiment at a time when the country needed to take full advantage of the current economic recovery. “The intervention will lay a solid foundation for future power security,” describing the move as an “upside surprise which is potentially favourable for investment and growth”.

The president’s announcement of significantly upping embedded generation to 100MW and introducing the option to send unused power into the national grid was dressed up in hope, progress, and moving South Africa forward as an investment destination for foreign companies looking to invest in new African markets. 


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