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Solidarity calls on the private sector to apply for energy generation permits en masse

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Solidarity calls on the private sector to apply for energy generation permits en masse

Solidarity CE Dr Dirk Hermann
Solidarity CE Dr Dirk Hermann

7th July 2022

By: Darren Parker

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The only viable and sustainable solution to South Africa’s escalating electricity crisis is for small independent power producers (IPPs) to immediately flood the market on a large scale, trade union Solidarity’s Research Institute (SRI) has said.

Through a concerted effort by the private sector – including businesses and private citizens alike – to invest in IPP capability, the country’s energy crisis could be resolved within months, the trade union said during a media briefing on July 8.

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However, such a strategy would require a government that was willing to act and remove all red tape and bottlenecks.

Solidarity was planning to submit a Parliamentary petition to get any possible obstacles or barriers out of the way.

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It noted that, owing to a major lack of political will, there was still uncertainty among entrepreneurs and IPPs about investing in new generation capacity.

With regulations for large-scale private power generation having been amended in 2021, any private entity may generate up to 100 MW each with a permit and without needing a licence, with no further statutory restrictions.

Solidarity said it would endeavour to lead by example, announcing plans to become involved in power generation itself through development company Kanton, in which Solidarity is the main shareholder.

“Our members’ jobs and income are being destroyed on a large scale as a result of the power crisis. The biggest act of job protection we can undertake right now is to do everything possible to feed power into the system,” Solidarity CE Dr Dirk Hermann said.

He told Engineering News that Solidarity’s power generation investment would be in solar and that the permit application process would hopefully be started within the next two months.

If all went smoothly, Hermann believed the generation capacity could be operational within a year.

He said the priority was to initially provide power for Solidarity’s own facilities, then to provide power to the surrounding communities and, lastly, to feed into the grid as a commercial power provider.

These pronouncements came on the back of the release of a report compiled by the SRI, which showed that, from now until 2035, South Africa’s private sector will need to invest in generation capacity that is nearly equal to that of State-owned utility Eskom’s entire current generation capacity.

To make matters more complex, South Africa will lose generation capacity of 22 000 MW owing to several coal-fired power stations reaching the end of their lives between now and 2035.

“If the private sector can seize the opportunity, it could bring about a power revolution. If we continue to place our hope in Eskom and the State, it will result in a power depression,” Hermann asserted.

He said it was necessary for all developers, shopping malls, big companies, resident associations, entrepreneurs, large-scale farmers and others to submit applications for the generation, distribution and sale of power as soon as possible.

“It is the right thing for the country and it offers commercial opportunity. The new electricity sector can create thousands of new jobs directly and millions indirectly,” Hermann said.

SRI head Connie Mulder said Stage 6 load-shedding was likely to become the norm going forward, with the current trend likely to result in more extreme bouts of load-shedding if urgent action was not taken.

South Africa’s generation capacity is currently 9.7% lower than in 2012, while the population has grown by more than eight-million people.

He quipped that, if swift and decisive action was not taken now, then in years to come, South Africa would have enough electricity capacity to cover the country’s needs; however, not because of increased generation capacity but because there would not be an economy left to demand it.

Solidarity also announced on Thursday that it would establish a help desk to assist applicants apply for generation permits from the National Energy Regulator of South Africa (Nersa).

Solidarity would also urgently investigate ways to potentially assist in training in power generation and the development of components locally to stimulate the generation of power.

Mulder said the localisation of renewable energy skills and manufacturing capacity was the only way to ensure that the price of power generation remains stable in the medium term and decreases in future years.

“We are convinced that the barriers for private generation of power will break. We want to prepare for it by becoming involved with power generation on a small scale and by creating skills.

“The private sector must now remove all possible bottlenecks. Only if there are many and different types of applications will all the obstacles to private power generation be removed,” Hermann asserted.

He said the energy crisis had created a will for private generation of power with the government, but that Nersa needed to do more to remove all the obstacles still hampering the roll-out of private generation projects.

“The processes must be without any obstacles. If there exist any administrative bottlenecks, we will also be prepared to remove those through litigation,” Hermann stated.

According to the SRI’s report, the government’s Integrated Resource Plan 2019 (IRP 2019) was deeply flawed and incomplete. Even if the IRP 2019 were to be 100% successfully implemented, it would be completely inadequate to solve the power crisis, given that it is generally considered to be outdated.

In addition, the government does not have a history of successful implementation, Mulder pointed out.

The SRI report recommends that all barriers to deregulation be removed, that skills be developed to meet the new demand within the private sector and that a tariff system favourable to small-scale power producers be developed urgently.

The report also showed how the lack of electricity was impoverishing South Africans further, making the country unfavourable for investment. The lack of electricity was the biggest obstacle for economic growth and low employment, the report states.

The SRI report also describes in detail how Vietnam, which has a similar energy landscape to South Africa, has shifted from major energy shortages to huge energy surpluses. Vietnam’s strategy was to break with the monopoly of State-controlled generation and encourage and incentivise drastically scaled up entry of private small-scale power producers, the SRI report states.

“We do not have to reinvent the wheel from scratch. Countries such as Vietnam have shown that the solution to undersupplied power generation will be found on the roofs of ordinary citizens rather than in the corridors of major government projects.

“Technology in electricity generation has changed radically and, with the right steps, we will be able to resolve load-shedding within a year,” Hermann stated.

ESKOM
Solidarity further emphasised the importance of a functioning Eskom and said any solutions would have to be complementary to Eskom’s efforts and would not be able to replace the State institution.

“Leaving Eskom out of the conversation regarding the future of electricity in South Africa would be dismissive of the extent of the coming power crisis – it would not be the one or the other. We need everything,” Hermann stated.

Eskom’s management is supportive of greater private sector investment in generation capacity and the utility considers that it will, in future, be key to the transmission of electricity in South Africa but only one of many generators of electricity.

Eskom continues to face huge challenges in terms of corruption, capacity and finances, which only seem to worsen every year.

“It’s not going well with Eskom this year, but at least it’s going better than next year,” Hermann quipped.

Solidarity said that Eskom had to be stabilised by “locking up the crooks, firing the bad guys and paying off the debt”.

“For this, Solidarity will continue to lay criminal charges against State capturers and, once again, submit a list of skilled and willing engineers to Eskom and the [relevant government Ministers].

“The only way for Eskom to overcome its financial predicament will be if the economy grows, and the only way the economy can grow will be if power generation is decentralised.

“Eskom must become a role player in an exciting and competitive energy sector in order to return to profitability and stability,” Hermann said.

In closing, he said it was unthinkable for government to continue to implement build limits on IPPs in such a state of crisis, while also recommending that the Risk Mitigation Independent Power Producer Procurement Programme be scrapped in its entirety because “it is not working”.

Rather, the government should focus on radically ramping up training and manufacturing capability on renewables, he suggested.

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