For several years, certain forward-looking commentators argued that by making only a minor amendment to Schedule 2 of the Electricity Regulation Act South Africa could unleash much-needed investment into distributed power generation.
After much resistance and some high-profile “arm twisting”, the amendment was eventually made in August 2021.
As a result, the licensing threshold for distributed generation projects, including those that would wheel electricity using Eskom or municipal grids, was increased from 1 MW to 100 MW, and such projects could be registered with the regulator rather than undergoing onerous licensing.
While registration was initially cumbersome, the system was streamlined and registrations began flowing as intended under the reform, which had been elevated to an Operation Vulindlela priority.
As the electricity crisis intensified and it became clear that the reform represented one of the quickest and cheapest options for introducing new capacity, the 100 MW cap was subsequently removed altogether in December 2022, in line with the Energy Action Plan unveiled by President Cyril Ramaphosa in July of the same year.
The value of the reform is now showing up in statistics, some of which are contained in the most recent Operation Vulindlela progress report, which indicates that the surge in private electricity generation investment continues to “outstrip expectations”.
The report shows that, between January and March this year, the number of distributed generation projects above 10 MW registered with the regulator involved potential projects, primarily solar and wind, with a combined capacity of 2 427 MW.
This represents a massive jump from the 1 664 MW worth of registrations for 2022 as a whole, which had itself been a substantial rise from the 134 MW registered during 2021.
Also highlighted is the strong rise in requests for grid- connection budget quotes from Eskom’s Grid Access Unit. In total, the unit has received budget quote requests for projects with a combined capacity of nearly 13 400 MW, and has issued such quotes for projects with a combined 4 321 MW.
The pipeline of projects “in active development” being tracked by Operation Vulindlela’s Embedded Generation Task Team has grown to 108, and these projects have a combined capacity of just over 10 000 MW. Should they proceed, the projects will involve capital investments of more than R200-billion.
The report also offers some insight into when these projects will begin helping to relieve the country’s debilitating power constraint, showing that more than 1 300 MW should enter commercial operation this year, followed by another 3 000 MW in 2024.
Given that South Africa now needs to build about 8 000 MW of new, mostly variable renewables, capacity yearly to help address the supply gap that has emerged as a result of a failing coal fleet that is also approaching decommissioning, momentum behind this reform needs to be sustained.
Doing so will require progress on the next far bigger set of reforms, many of which are outlined in the Electricity Regulation Amendment Bill currently before Parliament.