The Minerals Council South Africa (MCSA) supports further regulatory reforms to streamline the process of regulatory approval and licensing of self-generation electricity projects from a ‘red tape’ situation towards a ‘smart tape’ situation that will enable shorter timelines and a less bureaucratic approach. Should we achieve this, then South Africa will see more projects like the 40 MW solar plant that was announced by Gold Fields.

Says Minerals Council CEO, Roger Baxter:
“Since 2008, very rapid increases in electricity prices along with the unreliability of electricity supply have been the two largest contributing factors not only affecting existing large scale mining operations, but also impacting on the downstream processing and ferro-alloy production industries. The critical question is – what are we doing to encourage self-generation in the country and the economy?”

Self-generation projects have the potential to contribute significantly towards easing electricity supply constraints in South Africa while at the same time improving the competitiveness of the mining sector by reducing the cost of electricity and the industry’s carbon footprint.

Currently, 17 self-generation projects with capacity to generate 2.4 GW of electricity, at various stages of completion within the regulatory process, are underway by Minerals Council members. Of these, 12 projects with capacity to generate 1.6 GW of electricity are renewable self-generation projects. It is estimated that these projects could come online within the next 18 to 36 months.

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Since 2019, significant progress has been made to unlock the regulatory environment and enable self-generation of electricity. The Minerals Council continues to engage constructively with the Department of Mineral Resources and Energy (DMRE), NERSA and Eskom on those constraints that delay the execution of self-generation projects.

The Minerals Council has made the following recommendations to the DMRE to streamline the regulatory process to enable additional self-generation:

Establish a “one-stop-shop” mechanism coordinated by the DMRE to accelerate licensing of private sector generation for own use. The process should be streamlined, and all licensing should be approved within 90 days with progress reported to Cabinet.
Increase the cap from 10 MW to 50 MW on Schedule 2 self-generation licences.
Introduce licensing lite to make provision for small self-generation plants which currently undergo the same licensing process as large coal fired power stations.
Take economies of scale into consideration.
Address other potential constraints involving various government authorities that could cause delays.
Address wheeling as reaching agreement often is a long and drawn out process with charges sometimes rendering projects uneconomical.
Develop a flow diagram to outline the full licensing process to enable IPPs to plan accordingly and ensure accountability.
“We welcome the efforts of the DMRE to engage constructively with the industry on ways to streamline the regulatory approval process for self-generation projects. We support the increase in the Schedule 2 licence cap from 10 MW to 50 MW which will allow for more than 5,000 MW of electricity generation to be freed up which will go a long way in easing the electricity supply constraints in South Africa impacting all aspects of the economy,” concluded Mr Baxter.

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We have been wondering for a while now what exactly is the perceived age of the renewable energy market here in South Africa.
When we refer to age, we mean how long has the green economy been developing to a point of majority adoption or are we still in progress towards it? We decided to conduct some research via FB and our friends at Powerforum to help answer this question.
Powerforum – https://powerforum.co.za
https://www.facebook.com/groups/154713861795197

Why is it important? In an emerging economy that is currently fractured with so many suppliers, installers, and a huge variety of products on offer its important to understand where we are in the renewable marketplace and where we may evolve too.
We posed the question: If the south African renewable marketplace were a person, how old would they be?
It may seem strange to ask in this manner but it proved to be an effective question. The results were interesting, so we crunched the numbers and this is what we got.
42% of participants voted on 7 years old
30% of participants voted between 7 – 10 years old
23% of participants voted on 3 years old

Given the general consensus, we believe the market to be an average of 7 years old. We also realize that the renewable energy market as a whole has been around quite a long time in fact as far back as the mid 19th century.

This research poll gives us a unique viewpoint. We know that in SA the genesis or uptake of renewables is a good 25 – 30 years already. However, this does not mean the general public at large knew or had knowledge of this including the available level of adoption at the time.

Ideally what this research points to is the following:
The general public is young to the knowledge of renewable technology
Technology is developing faster than ever before
Renewable technology adoption is increasing
The consumer knowledge gap is large and needs to be filled

The general public is young to the knowledge of renewable technology
The level of knowledge about renewable energy differs from country to country. We know that places like Australia, USA and Europe. This is in part to policy and availability to information. Additionally, we also know that these countries have been faster in the adoption cycle of renewable technologies for their cities.
Technology is developing faster than ever before
Renewable technology is developing at a faster rate than ever before. This is due to the global increased uptake of renewables and the increase in the need for independent energy and self-sufficiency. What is current today will in most accounts not be current in the next 12 months to 18 months.

While green tech development is great, it keeps increasing the knowledge gap of both consumers and installers. This also allows a bigger space for more product entrants to enter the market which in most cases are rebranded products which is prevalent in the inverter and battery space.
Renewable technology adoption is increasing
The adoption rate of renewable technology is believed to be growing at a rate of 13% per year globally. Covid-19 did put a slow down on this growth curve however experts believe it will keep progressing year on year without fail.

As technology progresses and is taken up faster in developed economies like the USA, other developing economies like South Africa lag behind slightly. This is due to many factors such as government policy formulation, consumer spending, and economic growth rates. 
The consumer knowledge gap is large and needs to be filled
Consumers want to learn and be knowledgeable about many things especially before they spend money on something. This is especially true for solar energy due to its large expense and relative explosion in SA as a feasible option to mitigate Eskom load shedding and cable theft.

The knowledge gap is large in part to a highly fragmented market with so many products on offer as well as little information to help guide consumers on how energy systems work. This is why Inside Energy was created. Product knowledge, system knowledge and overall understanding on how various renewable energy options work is lacking.

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​Minister of Mineral Resources and Energy Gwede Mantashe has published new embedded generation regulations which could help businesses and private individuals reduce their reliance on Eskom.

In the regulations, the government has proposed lifting the threshold for embedded generation capacity from 1MW to 10MW.

This comes after President Cyril Ramaphosa announced in his state of the nation address that the government was considering lifting the threshold to reduce strain on the struggling national power grid.

“Recent analysis suggests that easing the licensing requirements for new embedded generation projects could unlock up to 5,000MW of additional capacity and help to ease the impact of load-shedding,” he said at the time.

“We will therefore amend Schedule 2 of the Electricity Regulation Act within the next three months to increase the licensing threshold for embedded generation,” Ramaphosa promised.

The licencing requirements were a stumbling block for many businesses which aimed to help alleviate the electricity crisis in South Africa by supplying their own power from solar, wind, other self-generation platforms.

New regulations
Currently, the Electricity Regulation Act requires entities who want to build power plants greater than 1MW to obtain a licence from the National Energy Regulator of South Africa (Nersa).

The new regulations state these entities will no longer have to obtain a licence for generation capacity up to 10MW.

They will still need to register with Nersa, but it’s not clear exactly how this process will differ from the current regime.

While the move will be welcomed by businesses, power experts and analysts have called for a bigger increase.

Professor Anton Eberhard, who directs the Power Futures Lab at UCT’s Graduate School of Business, told Reuters the new threshold was not high enough.

He said the Economic Advisory Board had recommended that the threshold be raised to 50MW, and pointed out the new regulations did not apply to projects aimed at adding capacity to the transmission grid.

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​A new report on electricity access for low-income households by Tracy Ledger, Lead Researcher on the Energy and Society programme.

Poverty has received scant attention from an energy perspective. This is remarkable given that energy is central to the satisfaction of basic nutrition and health needs, and that energy services constitute a sizeable share of total household expenditure in developing countries.

This working paper focuses on how the affordable energy access goals of South Africa’s energy policy have been undermined: our analysis indicates that this is the result of a combination of poor system governance, the failure to allocate clear accountability for delivering affordable access, haphazard institutional alignment and an overarching failure to identify and address critical competing policy tradeoffs, particularly between affordable energy access for households and municipal financial viability.

Many of these negative outcomes originate in the local government sphere of the state — in the structure of its revenue model, in the priorities emphasised by national departments with key oversight roles over municipalities, and in the central gatekeeper role that local municipalities play in determining who gets access to subsidised services and who does not. Certainly, there are multiple weaknesses in the overarching policies that local government is responsible for implementing (which weaknesses need to be addressed), but the manner in which these have been implemented by local government has made a bad situation even worse.

The current operation of the energy distribution system is actively and significantly contributing to increased poverty and inequality, as is detailed in this working paper. Key oversight institutions are effectively reproducing and entrenching these outcomes, either by neglecting their mandated oversight roles in respect of energy access, or by emphasising competing outcomes inherently at odds with a pro-poor energy agenda.

This situation is completely contrary to the intentions of both South Africa’s pro-poor transformation agenda (including the central role of local government in delivering that agenda) and original policy intentions concerning the developmental role of energy in a post-apartheid society. These outcomes also have the potential to undermine the decarbonisation goals being pursued in the transition from coal to clean energy. Effectively, by ignoring the details of what is actually going on in our energy distribution system, we are building and entrenching two parallel energy systems: a visible, clean system based on renewable energy generation to which access is effectively limited, alongside a largely invisible, dirty and dangerous system that is the only option for millions of households.

Download the full report here........

​While Eskom is currently slated to pay low tariffs for electricity from Karpowership’s three vessels, this could fluctuate wildly over the course of the next 20 years – potentially resulting in a massive rise in the cost of electricity from these units.

This is according economist Mike Schussler, who explained to the City Press that the price of electricity from these ships will change in accordance with the international price of liquefied natural gas and the rand/dollar exchange rate.

Since the contract is for 20 years, what is now a cost-effective project could therefore become a massive nightmare for consumers down the line.

Schussler highlighted how a similar situation happened with an aluminium smelter at Richards Bay.

The cost of this power was linked to the price of aluminium on the London Stock Exchange, as well as to international exchange rates and other foreign considerations.

Independent analyst Ryk de Klerk calculated in 2020 that Eskom had incurred R15 billion in losses since 2013 due to the above aluminium smelter situation.

Schussler is worried that the powerships could present the same problem in the long-term.

A “fast, effective, reliable” solution
Karpowership advertises its ships as a “fast, flexible, reliable” solution to energy supply needs.

These ships will also be costly, as the CSIR calculated that South Africa could pay up to R218 billion across its 20-year contract with the energy company.

Experts have criticised the length of this contract.

“That the South African government would procure one [powership] for 20 years speaks to the depths of the country’s power crisis, and questionable long-term planning in light of dropping renewables costs,” said Antoine Vagneur-Jones, an analyst at BNEF’s energy transition policy team for Europe, Middle East and Africa.

Vagneur-Jones said that most similar contracts have spanned no longer than 10 years.

In response to queries over the variable cost of internationally-sourced liquefied natural gas, Powership said: “Costs are kept low by Karpowership’s reach into the LNG market and an exclusive, long-term deal with Shell.”

Department of Mineral Resources and Energy Deputy Director General, Jacob Mbele, also told energy expert Chris Yelland that government hopes to source liquified natural gas in South Africa over the course of the contract, which would reduce costs significantly.

“Yes, we currently don’t have gas in South Africa. But there are explorations that are happening, and there are findings. It is likely that, in the future, the gas for these powerships will come from local fields,” said Mbele.

“When local gas becomes available, I can see a situation where this local gas will become the cheapest option, because it will be sourced closest to where it will be required and used.”

How powerships will fight load-shedding
Karpowership SA will dock its powerships at Coega, Richards Bay, and Saldanha, and this will provide a combined 1,200MW of ship-to-shore electricity.

Internationally-sourced liquified natural gas will be channeled into generators on the powerships to produce electricity.

The power is fed directly into the transmission network from an onboard high voltage substation.

These powerships are envisioned to be a key part of providing sufficient power to the troubled South African energy grid.

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​THE Shoprite Group now generates enough electricity to power over 1 100 households – 12 300 MWh of electricity – a year from solar energy, following the installation of rooftop PV (photovoltaic) panels at 19 sites in South Africa and Namibia.

The Group has also fitted 649 solar panels to the roofs of its refrigerated trucks, which generate 760 MWh annually – enough power to run 1 040 refrigerators for a full year. These allow drivers to switch off truck ignitions at delivery locations, reducing noise and exhaust pollution, while keeping the cold chain intact.

There are now 18 stores throughout South Africa and Namibia in the Group that harness the power of the sun for their operations. These include Checkers Plettenberg Bay Mall, Sitari, Gordons Bay, Constantia, Hermanus and Whale Coast Mall and Shoprite Strand (Western Cape), Shoprite and Checkers Parys as well as Checkers Woodlands (Free State), Shoprite Rustenburg (North West), Shoprite Devland (Gauteng), Shoprite Kimberley and Kathu (Northern Cape) and Shoprite Oshakati, Otjiwarongo, Ongwediva and Tsumeb (Namibia).

And the Group’s largest installation, at its Basson distribution centre in Brackenfell, is a remarkable move to reduce the company’s impact on the environment. There are now enough solar panels at this distribution centre to cover an entire soccer field, and the 7 706 m2 of panels have a generating capacity of 1MW.

“Apart from these solar panel installations, we have also signed an agreement which will see the Group procure 434 000 MWh of renewable energy per year for the next seven years. We are the first retailer to close such a deal, which is arguably the first of its kind in Africa,” says Sanjeev Raghubir, Sustainability Manager for the Shoprite Group.

In a bid to find innovative ways to reduce electricity usage, the Group has also replaced flourescent lamps with energy-efficient LED lamps. The process cost R98.3 million, and in the four years since its inception has saved 83.8 million kWh of energy.

Shoprite recently scored an A- for its climate change and water security disclosures on the globally recognised CDP platform, which further underlines the retailer’s commitment to environmental sustainability.

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​Energy minister Gwede Mantashe announced the preferred bidders for the government’s emergency risk mitigation IPP programme in March, which include three liquid natural gas powerships.

The Risk Mitigation IPP Procurement Programme (RMIPPPP) aims to alleviate South Africa’s electricity supply constraints and reduce the use of diesel-based generators.

Two-thirds of the new RMIPPP programme – 1,220MW of the 1,845MW – went to a single company, Karpowership SA.

The CSIR estimated that Karpowership SA, a unit of the Turkish Karadeniz Energy Group, can get as much as R218 billion from the 20-year deal.

This decision faced severe criticism from many energy experts because of its environmental impact, the lack of local gas resources, and the cost.

Many people argued that solar and wind power, in combination with battery storage, provide a better and more sustainable solution.

South Africa is blessed with a lot of sunshine and wind which make these renewable energy options an obvious choice.

While the programme includes solar PV, wind, and battery solutions, Karpowership SA is by far the biggest beneficiary.

Karpowership SA has responded to the local procurement criticism, saying at least 65% of its workforce will be South African and employed from local communities.

The company added that it will maintain all local and international environmental codes and protect South Africa’s oceans, ports, and sensitive environmental areas.

​Energy expert Chris Yelland delved into the powership procurement decision in an interview with Department of Mineral Resources and Energy DDG, Jacob Mbele, and IPP Office Acting COO, Maduna Ngobeni.

He also explores some of the issues relating to the selection of gas-to-power over wind, solar PV, and battery energy storage for two thirds of the generation capacity awarded.

Chris Yelland: Why are preferred bidders using solar PV technologies required to buy locally made solar PV panels, which may not available from local manufacturers in the quantities required by the market, and may come at a substantial price premium, while for the Karpowership projects, the ships, gas engines, floating fuel storage and regasification units (FSRUs) and the liquified natural gas (LNG) fuel (which in itself accounts for about 60% to 70% of the total cost) is allowed to be fully imported?

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​Gwede Mantashe, Minister of Mineral Resources and Energy, has announced the winning emergency power bidders and opened bid window 5 of the REIPPP programme.

The Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP) is a direct response to fill the 2,000MW short-term electricity supply gap that South Africa’s Integrated Resources Plan (INRP2019) indicated between 2019 and 2022.

This risk mitigation programme is meant to fill the stated supply gap and reduce the use of expensive diesel-based peaking electrical generators in the medium to long term.

In his State of the National Address 2020 President Cyril Ramaphosa announced various measure the DMRE would need to implement to address the country’s energy shortages. Among these measures were the urgent need to:

Procure power that can be brought online in the shortest possible time;
Ease requirements and processes for generation for own use;
Issue Section 34 Determinations in line with the IRP2019; and
Enable municipalities in good financial standing to generate or buy their own power.
Mantashe pointed out that NERSA may process licence applications for self-generation facilities above 1MW, even if they are not in compliance with the IRP2019. “But, people who want to do self-generation for own use, you don’t need a licence and there is no limit. What triggers the licence requirement is connection to the grid, and trading your surplus,” said the Minister.

Emergency power bidders announced
In October, in response to President Cyril Ramaphosa’s directives on the Economic Reconstruction and Recovery Plan, the DMRE set a target of 13,814MW to be delivered from a mix of sources. This included the 2,000MW to address the immediate electricity supply gap.

The bid submissions for emergency power closed on 22 December 2020 and attracted a total of 28 bid responses with a potential contracted capacity of 5,117MW. “This clearly demonstrates a sustained private sector interest in participating in the South African energy landscape. The Risk Mitigation IPP Procurement Programme succeeded in attracting project proposals featuring a variety of technology combinations,” said Mantashe.

The quantity and quality of the bid responses and potential megawatt of contracted capacity allowed for a competitive price evaluation: “All compliant bids were subjected to local and international benchmarking which is necessary to ensure that we receive Value for Money as required by the legislation.”

The evaluation process has resulted in the selection of eight Preferred Bids totalling 1,845MW and a further three Eligible Bids totalling 150MW. The three eligible bids are subject to value for money proposition in line with the provisions in the Request for Proposal. “It is important to note that these three bidders are within the 2,000MW capacity threshold in terms of the evaluation rankings, but their announcement can only be made following satisfactory value for money propositions,” said Mantashe.

The preferred bidders are:

ACWA Power Project DAP;
Karpowership SA Coega;
Karpowership SA Richards Bay;
Karpowership SA Saldanha Bay;
Mulilo Total Coega;
Mulilo Total Hydra Storage;
Oya Energy Hybrid Facility Umoyilanga Energy

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South Africa’s electricity generation crisis has created major opportunities for companies, businesses and individuals to start generating their own power, Exxaro CEO Mxolisi Mgojo said on Thursday when the JSE-listed black-empowered company declared generous dividends following a resilient 2019 performance, despite coal price odds.

“That’s a big shift, over and beyond what was originally planned in the IRP 2019. What is becoming very critical now is how we actually fast-track the enabling of self-generation to happen, because we know that for the coming 18 months to two years, we’re going to be confronted by continuous load-shedding, until such time as the maintenance programme has been done effectively, and Medupi and Kusile are sorted out.

“Like many other mining companies, we are looking at how we can plug part of that gap by providing our own ability to generate power for ourselves, and over and above that we see the area of renewable energy being a very critical area going into the future, hence our decision to buy the remaining 50% of Cennergi. All the conditions precedent have been met and at the end of this month, we’ll close that transaction formally, which means we'll own 100% of the renewable energy company,” he said.

Forming part of Exxaro’s response to climate change is the targeted reduction of its coal resources by 22% over time, as well as a commitment to achieving a carbon neutral footprint by 2050.

He said Cennergi provided Exxaro with an opportunity to focus its resources and capital allocation much more rigorously around renewables.

“Part of the strategy is to use Cennergi as a stepping stone off creating an energy business going into the future,” he told Mining Weekly.

He made an impassioned plea for climate change to be taken with the utmost seriousness. The black-led diversified resources company is itself aligning strongly to the Paris Agreement in response to climate change risk, and succeeding in promoting powerful environment, social and governance (ESG) excellence.

“If we don’t take climate change issues very seriously and see it as being part of our responsibility to respond in a very effective and impactful ways, God help us, because our children will be inheriting a very, very challenging future,” he said.

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Cape Town wants to set up its own independent power producer office to secure renewable energy, following President Cyril Ramaphosa’s announcement during his Sona address that municipalities in good financial standing will be allowed to procure their own power from IPPs.

Executive director for energy at the City of Cape Town, Kadri Nassiep says the City has engaged national treasury with a view to setting up its own independent power producer (IPP) office along the lines of the renewable energy independent power producer programme (REIPPP).

He says “we have also engaged CSIR to prepare our mini-IRP that will direct our call for proposals”. Electricity provision in the country is guided by the integrated resource plan (IRP) which sets out what electricity will be sourced and when.

Government has used the IPP office, which falls under the department of mineral resources and energy, to procure renewable energy in earlier REIPPs. The IPP office has begun an exercise to source 2,000 to 3,000 megawatts of emergency supply on an urgent basis.

Cape Town’s intention to set up its own IPP office, which will implement its own IRP, would constitute a dramatic re-shaping of the energy landscape.

Nassiep says “we still have to refine tariffs, but we are looking at it already”.

Budgets need to be realigned, he says, but that’s not a huge issue.

“So we are cautiously optimistic, but let’s see what [mineral resources and energy minister] Gwede Mantashe publishes in terms of schedule 2.”

Mantashe announced earlier in February at the Mining Indaba in Cape Town that the government would be gazetting a revised schedule 2 of the Electricity Regulation Act, which will enable self-generation and facilitate “distributed generation” by municipalities.

The City of Cape Town has fought a protracted battle with the minister and regulator Nersa over the right to source its own electricity. The dispute has its origins in 2015 when then Cape Town mayor (Patricia de Lille) asked the then energy minister (Tina Joemat-Pettersson) to allow the City to source renewable energy, but did not even get a reply.

The case has been set down to be heard in the high court on 11-12 May. Given the constrained electricity supply, the City of Cape Town had argued for an earlier court date, but has not been able to secure this.

Asked if the court case will still go ahead, Nassiep said:

“In my opinion yes. We still need clarification from the court regarding our rights.

“For instance, the minister might opt to issue [a] once-off determination in favour of munis and then not again. Or he can opt to keep it later to a cap of 500 megawatts, which might limit us unfairly. So it’s still needed.”

Nassiep says that “unfortunately” there is a likely two- to three-year time horizon for Cape Town’s own sourced power to come on stream because of financial closure issues, environmental impact assessments, power purchase agreements as well as connection charges and ordering of connection and plant equipment.

The Centre for Environmental Rights (CER) has joined the Cape Town court action, the CER’s Nicole Loser saying that local government has a constitutional duty to provide clean and healthy electricity, “which does not pollute our air, water, soil, or damage our climate”.

Loser says the Sona remarks were “very vague” on the details of municipal procurement.

“Also not clear is if there will be the needed legal reform to address the current uncertainty around municipal procurement of whether Mantashe will simply issue the determination requested by the City.”

Cape Town mayor Dan Plato cautiously welcomed Ramaphosa’s announcement.

“However, urgent clarity is required from the national government on the legal and regulatory nuts and bolts of how this must happen.

“We need urgent clarity from the government on the roles and responsibilities for municipalities and other stakeholders in terms of the new generation capacity regulations in the Electricity Regulation Act,” said Plato.

He says the City is doing a study to determine how best to overcome energy poverty, through various projects including installing solar kits, solar home systems, increasing free basic electricity and improving access to gas. 

“Improving access to affordable electricity is a key deliverable that we are investigating at the moment.”

Ramaphosa also announced that “a Section 34 ministerial determination will be issued shortly to give effect to the IRP 2019, enabling the development of additional grid capacity from renewable energy, natural gas, hydropower, battery storage and coal”.

“We will initiate the procurement of emergency power from projects that can deliver electricity into the grid within three to 12 months from approval,” he said.

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