BUSISIWE MAVUSO: Onerous processes snuffing out spark of hope for energy supply
POSTED ON: March 8, 2022 IN by Admin
By Busi Mavuso
A national energy trading market will de-risk investments and spur more self-generation plants.
Mandated with cutting red tape across government, Sipho Nkosi has a daunting task as head of the new unit within the presidency. There’s so much red tape. But this one area is so important to our economic recovery that it needs special attention.
The cumbersome approval processes private companies are still required to navigate before being allowed to generate their own electricity are extreme. They completely undermine what President Cyril Ramaphosa was trying to achieve when he scrapped the need for a licence for self-generation energy plants of up to 100MW — energy security. We have an ongoing electricity supply crisis that is a binding constraint on investment, growth and job creation. This needs to be resolved urgently.
After raising the limit, it would be madness to then require companies to go through the same documentation and approval processes they would have had the limit not been lifted, right? Yet that is what electricity regulator Nersa requires companies to do — bar the public consultation process. The registration process itself can only start once all the permissions have been obtained.
There are numerous other serious challenges to SA achieving its goal of having an efficient national grid and transmission system equipped to cater for a competitive energy market. But this is low-hanging fruit, and if Nersa is unable to streamline the process, then government intervention is required. I don’t recommend that lightly for an independent regulator, but we have an energy supply deficit of 4-6GW. This is a national emergency and should be treated as such.
A private company can build a renewable energy plans and have it up and running inside two years, but applications are trickling in and no projects above 10MW are close to final approval. The current process requires approval from several government departments, Nersa and Eskom, through complex processes. To enable rapid development of new projects we need a separate government unit established specifically to process applications quickly.
To get the self-generation market up and running, such a unit would need a clear policy on wheeling — a cookie-cutter model that applies across the country to all municipalities. What we have now are endless bespoke agreements because each municipality is supposed to apply a wheeling tariff — the cost to transmit electricity from the generating plant to where it is needed — and then Nersa has to approve it.
Further electricity market liberalisation is also required to de-risk willing buyer-willing seller investments in generation. Self-generation companies do not have the security of the 20-year power purchase agreements with Eskom that energy generators in the Renewable Energy Independent Power Producers Procurement Programme secure through the bidding process. These are capital-intensive endeavours by the private sector that will relieve pressure on Eskom’s supply, but they are exposed to fluctuations in commodity prices and exchange rates, among other risks. A national energy trading market will de-risk investments and spur more self-generation plants.
These are measures we can institute in the short term to streamline processes to get more energy produced and put load-shedding behind us once and for all. We can’t afford bureaucratic delays. Just last week, Eskom CEO André de Ruyter announced that more than 4,000ha of Eskom land in Mpumalanga would become available to lease through auction by the end of 2022, and it will start approaching the market as early as April. This is part of a wider plan to lease 36,000ha for renewable energy generation. It would be tragic for that process to be thwarted by bureaucracy.
Speaking at the African Energy Indaba, De Ruyter outlined a longer-term challenge that needs more than merely slashing red tape: upgrading and expanding the existing transmission infrastructure to accommodate new generation capacity will require investment of R180bn over the next 10 years.
The numbers he mentioned seem daunting. Business Day quoted him as saying 5,800km of new power lines need to be built by 2031 — 73% more than Eskom has built in the previous five years. He added that insufficient capacity and slow progress on new developments pose a serious risk to SA’s energy transition.
Our energy system is struggling to cope with the changes it is undergoing. Let’s not forget that Eskom celebrates its 100th anniversary in 2023 and operated as a pure monopoly for 88 of those years. Our energy market has to adapt to climate-change imperatives, pivoting from coal to renewable energy while facing the energy supply crisis.
We cannot allow red tape to hold up the short-term measures we can put in place to accelerate the first target of matching generation supply with demand and ending load-shedding. The next target of upgrading the transmission system to cope with the new generation seems the perfect mechanism with which to kick-start that elusive R1-trillion infrastructure programme.
• Mavuso is CEO of Business Leadership SA. This article first appeared in Business Day.
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