Goodbye Eskom — South African companies want to generate their own power

The National Energy Regulator of South Africa (Nersa) has reported significant interest from businesses in generating their own power, reports the Sunday Times.

This follows government’s announcement in June 2021 that the threshold for self-generation had increased to 100MW.

“There is a lot of interest expressed with the increase of the registration threshold to 100MW — we have received more than ten inquiries from the industry,” Nersa spokesperson Charles Hlebela told the Times.

However, Hlebela said that while interest is high, Nersa has received far fewer actual applications to register for self-generation.

Six plants capable of producing over 1MW are set to go online in 2022, with the largest expected to have a capacity of 10W.

Energy minister Gwede Mantashe amended the Electricity Regulation Act on 12 August 2021 to allow private individuals and businesses to generate up to 100MW of electricity without a licence from Nersa.

This came after President Cyril Rampahosa promised that government would relax the regulations in his State of the Nation address a month before.

Experts believe that lifting the self-generation threshold will enable businesses and communities hamstrung by load-shedding to reduce their dependency on Eskom’s grid.

It will also help Eskom sustain a stable electricity supply while conducting maintenance on its ageing coal-powered generating fleet.

At its interim financial results presentation on 15 December, Eskom announced that it would lease the land near its power stations through an auction to private investors for renewable electricity generation.

The initiative will kick off in Mpumalanga, and private power producers may use the land to generate electricity for their own consumption or for sale to third parties.

Eskom explained that Mpumalanga was selected as the starting point for the project as it has the most coal-fired plants with established transmission and distribution infrastructure.

Eskom has applied for an electricity price increase of around 20.5%, which is not welcome news for South Africans who are already unhappy with the price of this utility.

However, Nersa claims that the actual jump in tariffs could be around 32.15% based on external factors not included in Eskom’s calculations.

These include the following:

• R14 billion for RCAs that had already been approved, but not realised, for the third multi-year price determination (MYPD3) period.
• R3.5 billion from the 2019/2020 RCA and R742 million for the Short-Term Power Purchase Programme (STPPP).
• A refund of R23 billion for an amount Nersa unlawfully deducted from Eskom as revenue was also factored into the regulator’s equation.

This would mean that Eskom’s revenue from standard customers would be R302.98 billion instead of R261.9 billion.

With forecasted sales of 171,549GWh, Nersa calculated Eskom would have to charge around R1.77 per kWh to reach its allowable revenue – equating to a 32.15% tariff increase.

Eskom has been critical of Nersa’s approach to this calculation, but whichever percentage is correct, the end result is that the wallets of South Africans will feel the pinch.

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