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Ramaphosa doubles next renewables round, scraps 100 MW cap on distributed plant and moots feed-in tariff as he unveils load-shedding crisis response

Ramaphosa doubles next renewables round, scraps 100 MW cap on distributed plant and moots feed-in tariff as he unveils load-shedding crisis response

President Cyril Ramaphosa
President Cyril Ramaphosa

25TH JULY 2022

BY: TERENCE CREAMER
CREAMER MEDIA EDITOR

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President Cyril Ramaphosa unveiled several far-reaching interventions – including a doubling in the allocation for the next renewables procurement round, the scrapping of the 100 MW licence-exemption threshold for distributed generators and a proposal of a feed-in tariff for self-generating households and businesses – as part of a much-anticipated action plan for ending load-shedding.

While refraining from declaring the “national crisis” a state of disaster as sought by some opposition parties, the President also announced that “special legislation” would be placed before Parliament to address remaining legal and regulatory obstacles to the urgent introduction of new generation capacity.

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“We will in the meantime waive or streamline certain regulatory requirements where it is possible to do so within existing legislation.

“This includes reducing the regulatory requirements for solar projects in areas of low and medium environmental sensitivity. It also means Eskom can expand power lines and substations without needing to get environmental authorisation in areas of low and medium sensitivity and within the strategic electricity corridors.

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“We are also establishing a single point of entry for all energy project applications, to ensure coordination of approval processes across government,” Ramaphosa announced.

TWO-PRONGED PLAN

The overall plan is two-pronged, with the first aimed at arresting Eskom’s operational instability, as reflected in the precipitous decline in the coal fleet’s energy availability factor to below 60%, and the second designed to introduce new generation capacity to the grid as quickly as possible so as to close an estimated supply shortfall of about 6 000 MW.

Without the additional capacity, Eskom says it lacks the “headroom” required to carry out much-needed maintenance across its 81-unit coal fleet that is made up of both aged and neglected coal plants and two new stations, Medupi and Kusile, which are not only years behind schedule and billions over budget but include defects that require remedying.

Much of the innovation in the plan, which Ramaphosa canvassed widely before announcing it on Monday night, rests on the second pillar of speedily injecting additional capacity through the following interventions:

  • A doubling of the allocation for Bid Window Six (BW6) of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), the bid submission date for which is in August, from 2 600 MW to 5 200 MW;
  • Lifting altogether the 100 MW licence-exemption cap on distributed generation plant being developed by miners and heavy industry. The reform, which was announced in June last year, had already stimulated 80 confirmed private sector projects with a combined capacity of over 6 000 MW;
  • Confirmation that the Independent Power Producer Office and the Department of Trade, Industry and Competition would announce a “pragmatic approach” to the local-content requirements that were currently impeding financial close for delayed projects procured under BW 5 of the REIPPPP;
  • The leasing of more grid-ready land by Eskom to facilitate further private projects in addition to the 1 800 MW private distributed investment expected following the first leasing round;
  • The issuance of a request for proposals for battery storage by September this year, and a further request for gas power thereafter; and
  • The Gazetting by Mineral Resources and Energy Minister Gwede Mantashe of a determination for the remaining allocations in the Integrated Resource Plan (IRP) of 2019, which would facilitate the opening of further bid windows on an expedited basis.

The President also announced that surplus capacity available from existing renewables independent power producers (IPPs) would be mopped up and Eskom would also be allowed to make a standard offer to buy electricity, for a period of two to three years, from those enterprises, mines, paper mills and shopping centres that have surplus electricity available to sell into the grid.

Possible imports from the region, including Botswana and Zambia, would also be explored.

The intervention, the President said, would also seek to stimulate investments by businesses and households into solar rooftop systems, which will be incentivised by the creation of a feed-in tariff that Eskom will extend to commercial and residential installations alike.

“This means that those who can and have installed solar panels in their homes or businesses will be able to sell surplus power they don’t need to Eskom.”

Ramaphosa said that Eskom would also pursue the roll-out of energy efficiency retrofits to reduce demand on the grid as well as demand management solutions, which could lower or shift demand by as much as 600 MW, particularly over peak periods.

OPERATIONAL FOCUS

At Eskom, meanwhile, the focus would be on ensuring operational improvements, including by increasing maintenance budgets and by installing capable leadership and skilled employees at the power stations.

Former Eskom staff and power station managers could also be recruited to restore good operational practices.

Efforts were also under way to safeguard diesel supplies through improved logistics and storage for the open cycle gas turbines.

There would also be coordinated efforts with law enforcement agencies, including the South African Police Service, to address sabotage and ongoing theft and fraud at the utility.

“The South African Police Service has set up a special law enforcement team to help Eskom in confronting crime and corruption.”

Over the medium term, the plan includes finding a solution to Eskom’s R400-billion debt burden and establishing an independent transmission company, unbundled from the Eskom generation and distribution units, by the end of the year.

There is also an intention to deploy Just Energy Transition climate finance to invest in much-needed transmission capacity and to repower decommissioned coal stations.

“Eskom will be constructing its first solar and battery storage projects at Komati, Majuba, Lethabo and several other power stations.

“These will result in over 500 MW being added to the system,” Ramaphosa announced.

In addition, the IRP would be reviewed and updated and the legislative process relating to the Electricity Regulation Amendment Bill would be fast-tracked to facilitate the creation of a competitive electricity market to further facilitate private investment.

The entire initiative would be overseen by a National Energy Crisis Committee, comprising all relevant Ministries, departments and agencies, and including a technical team chaired by the director-general in The Presidency.

“The National Energy Crisis Committee will draw on the best available expertise from business, labour, professional engineering entities and community-based organisations.

“The relevant Ministers will report to me directly on a regular basis to ensure that we move quickly to implement these actions.” 

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