By Jason van der Poel, Partner, Mzukisi Kota, Partner, Hielien Venter, Partner, Aviva Hoekstra, Associate & Emma Bleeker, Trainee Attorney from Webber Wentzel
Following President Cyril Ramaphosa’s announcement regarding Government’s intention to implement new strategies to end loadshedding once and for all, there has been some debate as to whether these interventions will provide the solutions SA so desperately needs.
In the first part of the article produced by Webber Wentzel on SA’s energy crisis some considerations were unpacked regarding the procurement of new generation capacity and how Eskom will go about purchasing surplus power from IPPs as well as expand existing power production projects. The second part will examine how SA will purchase power through the Southern African Power Pool as well as discuss the procurement of battery storage and gas-fired power and the easing of distributed generation regulations and new legislation regarding these developments.
- Power purchased from the SAPP:
Eskom will purchase power from neighbouring countries, such as Zambia and Botswana, that have excess electricity capacity, through the Southern African Power Pool (SAPP). We note that Eskom is already a member of the SAPP.
If a cross border project is intended prior to the enactment of new legislation, then there must be due regard of the requirements in regulations 6(4) and 8 of the Electricity Regulations on New Generation Capacity (as issued in terms of ERA). These require, among other things, that the Minister needs to be satisfied (when issuing a section 34 determination for a cross border project) that adequate agreements, memoranda of understanding or arrangements are in place or will be in place between the Government and the relevant foreign government or international organisation, as these are necessary to enable that cross border project.
- Procurement of battery storage and gas-fired power:
Eskom will be constructing its first solar and battery storage projects at Komati, Majuba, Lethabo and several other power stations. This will result in over 500 MW being added to the grid. By storing excess power for a later time when it is most needed through battery storage technologies, the grid will be able to deploy that power to address demand during peak periods.
A request for proposals for battery storage capacity will be released by September this year, and a further request for proposals for gas power will follow. We note that there has been no mention of new coal, nuclear or hydro procurement in the President’s address.
Special legislation will be needed to expedite the process of adding more generation capacity to SA’s woefully overstrained national grid. Photo by Brett Sayles: https://www.pexels.com/photo/gray-electric-post-on-green-field-under-white-clouds-and-blue-sky-1082062/
- EASING OF DISTRIBUTED GENERATION REGULATIONS AND NEW LEGISLATION
In June 2021, the licensing requirement for generation projects up to 100 MW was removed. President Ramaphosa has now announced the complete removal of the licensing requirement for embedded generation. This will incentivise further private investment in electricity generation and reduce the lead times to commence construction of projects. While these projects will not require licences, all new generation projects will still have to register with NERSA, comply with environmental legislation, and meet technical requirements for grid connection. Although this development is welcomed, some practical concerns arise that will need to be clarified by NERSA:
- The reference to “embedded generation” by the President creates some uncertainty because it is a term that is understood differently in different contexts. For example, it is not clear whether wheeling projects are included or not within this term.
- A question arises about transitional arrangements. What happens to projects that are envisaged to be above the 100 MW threshold and have already submitted licence applications to NERSA? Will these applications be carried through, or will they be converted into registration applications? NERSA will need to consider any changes in law in assessing the approach to such projects.
- Special legislation will be tabled with Parliament on an expedited basis to address the legal and regulatory obstacles to new generation capacity, for a limited period. In the meantime, Government will waive or streamline certain regulatory requirements where it is possible to do so within existing legislation. The following has been proposed:
- Reduction of the regulatory requirements for solar projects in areas of low and medium environmental sensitivity.
- Expansion of Eskom power lines and substations without needing to get environmental authorisation in areas of low and medium sensitivity and within the strategic electricity corridors.
- Establishment of a single point of entry for all energy project applications, to ensure co-ordination of approval processes across Government.
- Departments and entities are reviewing all existing timeframes to ensure that all applications are processed on an urgent basis.
To meaningfully address legal and regulatory obstacles, the “special legislation” will also need to other regulatory and permitting requirements and provide a regime for how these can be expedited. These include the following:
- Environmental and land consents, e.g. environmental authorisations, water use licences, heritage consents, agricultural consents, building plan approvals etc.;
- Ministerial approvals in terms of the Subdivision of Agricultural Land Act, 70 of 1970, for the long-term letting or sale of portions of agricultural land;
- Section 53 consents in terms of the Mineral and Petroleum Resources Development Act, 28 of 2002, for use of land surface;
- Local municipal requirements regarding land use (zoning) as well as general compliance with municipal by-laws (such as those relating to water); and
- Appeals and review proceedings, including how objections and appeals can be dealt with in an expedited manner.
For the conclusion to the article watch this space for Part 3.