embedded generation

Nersa signals intent to treat sub-100 MW registration as ‘administrative’ process

17TH AUGUST 2021

BY: TERENCE CREAMER

original article here

The National Energy Regulator of South Africa (Nersa) is still analysing the implications that a recent amendment to Schedule 2 of the Electricity Regulation Act, exempting grid-tied generation facilities below 100 MW from licensing, will have on its processes, rules and guidelines. However, fulltime regulatory member responsible for electricity Nhlanhla Gumede reports that Nersa views such registration primarily as an administrative process, rather than one where it will be expected to apply its regulatory discretion.

Speaking during a Power Future Labs webinar on the implications of the reform, which was gazetted by Mineral Resources and Energy Minister Gwede Mantashe on August 12, Gumede said that approvals were likely to be delegated to Nersa officials rather than having the Energy Regulator deliberate on them at its formal meetings.

“The view is that by the time these applications for registration are brought before the Energy Regulator all necessary consultation would have been undertaken and, therefore, there will not be a need for the regulator to apply its discretion.

“But the regulator would still retain the right to check and verify the information.”

Gumede also stressed that Nersa was in the process of reviewing its regulatory processes with the aim of improving efficiencies and that, in time, registration could migrate online from the current manual submission process.

“Clearly, as we improve our regulatory processes, we will have to include online applications and, therefore, a number of things could well be done online in future.”

The three-page Gazette notice does not prescribe how registration should be dealt with, stating only that registration will be required for plants with a capacity of no more than 100 MW.

Some concern has, thus, been raised that the registration could descend into a quasi-licensing process, defeating the objective of the reform, which is meant to remove constraints to investment in distributed generation capacity so as to reduce the ongoing threat of job- and growth-sapping load-shedding.

Meridian Economics’ Dr Grove Steyn, who is a member of the Presidential Economic Advisory Council and who has been a key advocate of the reform, said that “all eyes are now on Nersa to assess whether it will develop a new, modern online registration process”.

“The President [Cyril Ramaphosa] made it very clear when he announced these changes that the objective of these reforms is to reduce and remove regulatory red tape and that means Nersa.

“So, we hope that Nersa will create a supportive regulatory environment that embraces these critical policy changes,” Steyn said.

He cautioned, too, that there were several ambiguities in the amended notice relating to the use of the term “end-use customer” rather than multiple customers that would have to be resolved, as diversification of offtakers would be critical to de-risking especially small and medium-sized projects that were not linked to a single large offtaker, such as a mine.

While stressing that he was not a lawyer, Steyn expressed confidence that, if interpreted narrowly, the courts would resolve the matter in favour of multiple customers, as there was no clause in the amendment outlining a specific intention to limit electricity sales to a single customer.

Likewise, South African Solar Photovoltaic Industry Association’s DeVilliers Botha expressed optimism that the remaining bottlenecks and uncertainties could be overcome through ongoing engagements with government and Nersa.

Botha said that, prior to the reform, registration with Nersa would typically take four months to secure and could not be conducted concurrently with a technical registration with the distributor, be it a municipality or Eskom.

While there was no provision in the amendment to facilitate concurrent registration, the industry intended pursuing the matter further so as to help shorten the time it took to build much-needed new capacity.

Impala Platinum executive Dr Tsakani Mthombeni was more strident, arguing that there was a risk that capital could be diverted to other projects should registration delays be protracted.

Having navigated registration and licensing regimes in Australia, Ghana and South Africa, Mthombeni argued that policy and regulatory certainty can either “make or break” a project, with South Africa’s previous regulatory regime having proved particularly uncertain and time consuming.

“The registration process will have to be streamlined and we need to do our best to reduce, as much as possible, the time it takes to secure environmental authorisations.

“It would be positive if there was greater synchronisation to avoid double handling and having tasks that have to be done twice.”

There was also a need to clarify wheeling administration and tariffs, as without meeting “end-to-end” requirements of developers it would remain difficult to reach the point of making final investment decisions.

Overall, however, all the panellists were upbeat about the reform, which Steyn described as the most significant in the electricity supply industry for a generation.

“Despite the limitations of the amendment, I still think we are going to see a large market response,” Steyn said.

“In addition, these reforms also finally force us to deal with the real challenges to fixing the power system and accelerating the transition to clean energy.

“We are now forced to focus on issues like expanding grid capacity, developing capacity at the grid operators to assess and process connection applications, sorting out wheeling arrangements and the appropriate pricing, and developing planning capacity at the network and system operators to deal with greater renewable-energy penetration, including creating market mechanisms, and procuring ancillary services in a more efficient way.” 

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