Increase threshold for embedded generation to 50MW for a more energy secure future

25 May 2021

On Friday, 21 May 2021, I submitted comments on behalf of the Western Cape government to the Department of Mineral Resources and Energy (DMRE) in response to the proposed amendments to Schedule 2 of the Electricity Regulation Act, 2006, calling for the license-exemption cap for embedded generation plants to be increased from 1 MW to at least 50MW, and for all generation facilities to be exempt from licensing under the threshold.

Increasing the licensing threshold for embedded generation to 50MW or higher, and simplifying and finalising the registration process would provide certainty to investors and increase access to affordable, renewable energy in South Africa. We remain in an energy crisis and large-scale private sector participation in energy generation, in partnership with government, will be key to addressing the current shortfall.

In addition, further clarity is needed on the potential role of municipalities, and the role of the private sector as generators and distributors of renewable energy to residents and businesses, particularly as it relates to energy trading opportunities under the proposed amendments.

This clarity will be critical to the success of our Municipal Energy Resilience Project which seeks to support municipalities to take advantage of the energy regulations to generate, procure and sell their own power so that we can become more energy secure in the Western Cape.

The renewable energy sector in South Africa has the potential to attract much-needed investment that creates jobs. The amendments are a step in the right direction, but I also urge the Minister of Mineral Resources and Energy, Gwede Mantashe, to ensure that the proposed amendments to the Electricity Regulation Act simplify the current regulatory challenges to unlock these opportunities.

On Friday, I visited the 1.3MW solar PV plant at Old Mutual Park in Cape Town which provides around 10% of the commercial complex’s energy needs and demonstrates how the built environment can be adapted to help companies cut their energy costs, become more energy secure and reduce their carbon emissions. This solar plant is one of the reasons that Old Mutual was awarded a 6-star Green rating by the Green Building Council of South Africa.

The visit also allowed me to hear directly from representatives of Kigeni Energy and the SOLA Group, two companies on the frontline of renewable energy development in South Africa, about how the opportunities for growth in this sector were being hindered by the current limits and by the complex and onerous regulations application process.

During my visit I was informed that the plan is to expand the Old Mutual solar plant to 4.9MW, however due to the unclear and onerous process to register with the regulator it has taken the developers more than a year to try and obtain a license, and they are still waiting.

Projects like the Old Mutual solar plant are a great example of how private sector investment in renewable energy infrastructure can help to mitigate the medium-term impacts of load shedding and create jobs and grow the economy in the Western Cape.

And so, we urge Minister Mantashe to implement our proposed changes, increase the limit to at least 50MW and decrease red tape within that threshold. If done correctly, this will unlock huge latent potential in the renewable energy sector.  

Issued by Francine Higham, Spokesperson to David Maynier, Western Cape Minister of Finance and Economic Opportunities, 25 May 2021