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South African Energy Minister allows mines to self-generate electricity
February 10, 2020, 4:49 pm

“This will help close the energy gap caused by deteriorating Eskom plant performance,” says Gwede Mantashe.

Minister of Mineral Resources and Energy Gwede Mantashe told delegates at the Mining Indaba in Cape Town that government would allow mining companies to produce energy for their own use.

“This will help close the energy gap caused by deteriorating Eskom plant performance. Depending on the circumstances, the generation plant may only require registration and not licensing,” Mantashe said.

According to Andrew van Zyl, director and principal consultant at SRK Consulting, there is no better time to consider such opportunities.

“While Eskom’s base-load supply is still vital to keep mines running, independent power generation from renewable sources holds value for a few reasons. These relate to issues of rising electricity prices from the grid, as well as to mines’ environmental commitment and future carbon tax liabilities,” van Zyl said.

State-owned electricity utility Eskom had to institute a Stage 6 load-shedding schedule, which meant that they were short 6 000 Megawatts (MW) on December 9 2019 to a variety of breakdowns at its plants. In response to this crisis, a variety of players have suggested solutions, as in their view, this crisis could be mitigated if regulatory hurdles were eliminated.

Eskom instituted load-shedding on an intermittent basis since November 29 2018 after the connection with Mozambique broke down and it lost 700 MW of power imports. For most of 2019 however it has been its own plant availability that has constrained supply with the Energy Availability Factor (EAF) dropping to only 56.61 per cent in the first week of 2020. This compared with an average of 66.94 per cent for the full year and 71.84 per cent in 2018 and 78.61 per cent in 2017. The EAF in the first week of 2020 was made up of planned outages at 11.46 per cent, unplanned outages at 29.86 per cent and other outage factors at 2.07 per cent.

The South African Wind Energy Association (SAWEA) said then that current operating wind farms could add 500 MW immediately to the national grid, but more than 50 days later, there has been no movement on this front.

The wind industry is not allowed to do so currently due to the regulatory Maximum Export Capacity (MEC) on all operating wind farms, which governs how much energy is permitted to be exported by wind farm power generators. Currently wind farms can only export the pre-agreed maximum capacity into the grid and are forced to curtail any additional capacity.

“The operational wind energy plants have excess capacity of about 500MW available immediately. These can also be short term contracts that can be signed in this interim capacity constraint period and it doesn’t have to be viewed as long term commitments,” said Ntombifuthi Ntuli, CEO of SAWEA.

“Our current state of power shortage is threatening multiple sectors and especially small businesses that employ over half of the country’s labour force. Small businesses struggle to recover from extended periods of load shedding, especially stage 4, which allows for up to 4 000 MW of the national load to be shed,” added Ntuli.

The South African Photovoltaic Industry Association (SAPVIA) said that up to 2 000 MW of small-scale capacity could be added to the energy mix over the next 12 months. However, while the Integrated Resource Plan (IRP) 2019 had identified small-scale generation as the means to bridging the electricity supply gap, SAPVIA stated that it believes the bureaucracy associated with the licensing and registration of embedded generation facilities would hamper the rapid absorption of this much-needed supply source into the generation mix. SAPVIA also called for municipal bylaws to be amended to better clarify the requirements for grid connection, to reduce the timelines and uncertainties associated with grid access.

The association explained that, while facilities generating less than 1 MW only require municipal or Eskom technical sign-off to supply their owners or feed into the grid, facilities above 1 MW still need to undergo the strenuous National Energy Regulator of South Africa (Nersa) licensing process, which can take between nine months and a year to run its course, before the facilities can be commissioned.

SAPVIA believes the cap of 1 MW is “arbitrary” and said it “has no technical or commercial basis”.

According to the association, in most developed power markets, self-generators can develop their own embedded facilities and these can connect to the grid if they technically meet the relevant grid codes, without any cap on the size of the facilities. Consequently, SAPVIA proposed that 10 MW be set as an initial cap on projects, as long as the use of system approvals are granted.

The official opposition, the Democratic Alliance (DA), said the government could easily solve the electricity crisis by removing regulatory hurdles.

“The most efficient immediate step is using Section 34 of the Electricity Regulation Act (4 of 2006) which allows the Minister of Mineral Resources and Energy to issue a determination that allows qualifying municipalities to bypass Eskom and procure electricity directly from Independent Power Producers (IPPs).

Contrary to the President’s views, this can be done overnight and would go a long way to resolving energy shortages and pressure on the grid. Introducing IPPs into the mix is now a necessity. In fact, right now Minister Mantashe is sitting with at least seventeen section 34 applications for private generation and purchase of electricity on his desk waiting to be signed – from municipalities, mines and corporations,” DA leader John Steenhuisen said.

New Eskom CEO André de Ruyter has warned South Africa to expect increased load-shedding over the next 18 months, as Eskom will no longer defer required maintenance, and will aggressively move to prevent the deterioration of its power plants.

“As Eskom continues with the problems, we must have a fail-safe. We must continue to ensure that we get back to the days when we have a surplus of energy and when we lower the price of electricity,” Mantashe said.

Minerals Council of South Africa CEO, Roger Baxter, welcomed Mantashe’s comments as
mining companies have a project pipeline of some 600 MW for self-generation, but this could grow to 1,500 MW once there was regulatory certainty.

Helmo Preuss in Cape Town, South Africa for The BRICS Post