Page 27 - Energize February 2021

VIEWS AND OPINION

Embedded generation:

Key to supporting SA’s energy

intensive industries

by Michael Ball, Wärtsilä

hen President Cyril Ramaphosa delivered the 2021 State of the Nation
address, he spoke of Government’s bold plans for the country’s economic
recovery. One of the priority interventions outlined by the president was the
Wplanned rapid expansion of the country’s electricity generation capacity. As
one of the only four priority interventions, there was a clear acknowledgement by
Government that a stable and secure electricity supply is a prerequisite for economic
recovery and long-term growth.
Reporting back on the progress made over the past 12 months, President Ramaphosa
highlighted the noteworthy progress being made with the restructuring of Eskom, the
RMIPPP and the finalisation of REIPPPP Round 5. Despite this progress, he spoke of a
potential electricity supply shortfall of between 4000 and 6000 MW over the next five years.
There were also suggestions that further electricity tariff increases could be on the cards, as
he spoke of the need to “review tariff paths” to reflect costs and implement measures to
resolve the problem of municipal debt. Michael Ball
To alleviate the impact of further load shedding on households and businesses,
President Ramaphosa announced that the government would be moving ahead with long-
awaited amendments to Schedule 2 of the Electricity Regulation Act. These amendments While delivering significant benefits,
would ease licencing requirements for households and businesses wishing to generate their the rapid expansion of embedded
own electricity through embedded generation. renewable generation may also pose new
At present, only embedded generation below 1 MW is exempt from holding a generation challenges. It is well known that Eskom’s
licence. Those wishing to install capacity exceeding 1 MW are required to hold a generation ageing coal fleet will increasingly struggle
licence which entails significant costs, time, and bureaucratic red tape. Recent statements to balance the system as renewable
from Andre de Ruyter, Eskom’s CEO, suggest that the license exemption threshold could be intermittency grows. Eskom will, therefore,
increased to as high as 50 MW. The impact of such a move would enable South Africa’s be under pressure to fast-track
economic recovery to move more quickly. procurement of flexible capacity to ensure
South Africa’s energy-intensive industries, such as mining and manufacturing, system stability.
contribute significantly to economic activity and employment. These industries have been Overall, the easing of these embedded
particularly hard hit by electricity supply disruptions and rising electricity tariffs. By generation regulations is a significant step
supporting investment in embedded generation, the government would enable growth in in the right direction. As outlined in the
these industries through greater power reliability and lower energy costs. Furthermore, by IRP 2019, embedded generation is a key
utilising renewable technologies, such as wind and solar power, these industries would piece of the puzzle for South Africa to
dramatically reduce the carbon intensity of their operations. overcome the current power crisis. n
Given the sharp declines in cost, it is expected that most of the newly installed embedded
generation will take the form of solar PV capacity. As a result, we might see a significant About the author
increase in intermittent generating capacity connected to the country’s distribution network Michael Ball is a Project Development
over the coming years. Therefore, it will be important for those considering investment in large Manager within Wärtsilä Development
embedded generation facilities to explore options such as battery energy storage to avoid and Financial Services (“WDFS”). His
technical issues such as power instability, network overloading, power quality deviations and key focus areas include project
forced curtailment during periods of load shedding to comply with safety requirements. Larger origination, evaluation, and
battery storage solutions may also support with energy shifting which could reduce grid development of gas to power, hybrids,
consumption during peak tariff hours and further reduce energy costs. and battery energy storage projects.
Despite reducing the demand for Eskom’s electricity supply, embedded generation may Michael is currently based in Helsinki,
deliver several indirect benefits to the parastatal. By reducing the current electricity supply Finland, and covers both the Africa and
deficit, embedded generation would reduce Eskom’s dependency on expensive diesel fired Europe regions. His educational
open cycle gas turbines. The distributed nature of embedded generation may also help to background includes a Mcomm in
reduce transmission and distribution losses and could support the deferment of expensive Economics and Finance from the
grid network upgrades. University of Stellenbosch.

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