Fresh uncertainty?

16th July 2021 By: Terence Creamer - Creamer Media Editor

Fresh uncertainty?

One warning raised amid the euphoria generated by President Cyril Ramaphosa’s June 10 announcement that Schedule 2 of the Electricity Regulation Act would be amended to increase the licence-exemption cap from 1 MW to 100 MW and to allow for electricity wheeling and trading was that the registration of embedded-generation projects should not morph into quasi-licensing.

If it did, commentators cautioned, the much-vaunted reform could fall flat. It could even create fresh uncertainty that would delay much-needed generation investment in a context where Eskom has no financial capacity to invest, and government’s procurement programmes are simply not agile enough to help close an immediate supply gap of at least 5 000 MW.

Worryingly, two recent events indicate that the concern was justified.

One was some ominous statements made on the matter by Mineral Resource and Energy Minister Gwede Mantashe during a virtual event hosted by Absa. While indicating that the revised amendment was close to being finalised and would be shared with The Presidency to “reconcile our approach”, he also questioned whether there was a real distinction between the registration “permit” to be issued by the National Energy Regulator of South Africa (Nersa) under the new Schedule 2 and a licence.

He noted that Ramaphosa himself had stated that Nersa would be required to issue a permit and argued that one was needed to avoid “a free for all” that would “cause chaos in the country”.

In other words, there is a worrying possibility that, besides grid-connection and environmental permits, which were always going to be required, Nersa is now being positioned as an issuer of yet another permit, which was never the intention of registration.

The prospect of quasi-licensing was further reinforced by Mantashe – who had stoutly opposed any suggestion of lifting the threshold beyond 10 MW until Ramaphosa “twisted” his arm to do so – when he distilled the objective of the amendment as being that of speeding up regulatory approvals.

On that score at least, there was some suggestion of relief. The Minister stated that his “deal with the President” was that no permit should take more than two months to process. However, scepticism will linger, given the difficulties practitioners have had in navigating both licencing and registration in recent years.

The second worrying development was the fact that, the day before Mantashe spoke, the Nersa electricity subcommittee, which will advise the Energy Regulator on its response to the 100 MW reform, took the highly unusual step of closing its deliberations on the matter to the public.

Such a lack of transparency, together with Mantashe’s portentous statements, are disturbing, given the importance of the reform in helping to address the country’s lingering electricity crisis.

One can only hope that The Presidency will scrutinise the details of the amendment very closely when Mantashe delivers the revised version to it as promised and ensure that, in ‘reconciling’ the approach, the needs of the economy are truly put first.