Page 3 - Energize June 2021

FROM THE EDITOR:

Benefits of liberalising

the South African

electricity supply sector

by Roger Lilley, Now Media

The government’s announcement of its intention to increase the licence-free threshold for
embedded generation from 1 MW to 100 MW is seen as another step in its slow-but-steady
liberalisation of the South African electricity market.

his liberalisation, which has in large part been forced upon the the diversification of power generation technologies, an opportunity for
government by Eskom’s inability to supply sufficient electricity Eskom to close and decommission some of its older, most polluting, and
Tto meet demand, began with its Renewable Energy Independent least efficient coal-fired power stations, to decrease the country’s reliance
Power Producers Procurement Programme (REIPPPP) in 2011. The on fossil-fuels for electricity generation and thereby reduce its carbon-
REIPPPP, which replaced the government’s Renewable Energy Feed-in emissions, and to increase transparency and accountability in the sector.
Tariff (REFIT) programme of 2008, encourages the participation of the By relaxing Eskom’s stranglehold on the generation of electricity,
private sector in the generation of electricity to ensure that sufficient the government has, in effect, opened the doors to far greater foreign
electricity would be produced to support the government’s aspirational direct investment and renewed industrialisation as businesses will take
economic growth. advantage of this new and unprecedented opportunity in South Africa.
Currently, the supply of electricity is monopolised by Eskom, the
state-owned vertically integrated company responsible for most of the Challenges associated with this liberalisation
power generation (95%), transmission and distribution in South Africa. There may be some technical challenges, however. South Africa’s
However, in 1998, the government already saw a need for greater public electricity system was designed for a fairly centralised generation (most
participation in the electricity sector. The White Paper on energy policy, of the coal fired power stations are in the north of the country) with long
published in December 1998, acknowledges that “electricity makes high-voltage transmission lines carrying power to the coastal areas. Now,
a significant contribution to our economic growth and development” private generation will be built close to the point of load, which would be
and that “the energy sector can contribute to economic growth and fine, except that not only has the government authorised more private
employment creation, as well as providing infrastructure for households.” generation, but it has also opened the door to the trading of electricity,
It took ten years and severe limitations in electricity supply before that is, the selling of excess power to other users. Until now, IPP power
the government took deliberate steps to include the private sector in the had to be sold to Eskom for resale to the public.
generation of electricity. Since then, there have been five rounds of bids In future, power will be injected into the grid and Eskom will have
resulting in 6000 MW of privately generated electricity being added to to wheel that power to other users without actually owning the power.
the national grid. Although Eskom has a strict “Grid Code” which stipulates how power
The next step in the liberalisation of the sector was the minister producers can connect and inject power onto the grid, the wheeling of
of mineral resources and energy’s announcement of the Risk power from one producer to many consumers will no doubt keep the
Mitigation Independent Power Producers Procurement Programme power utility’s transmission and distribution engineers very busy.
(RMIPPPP) in August 2020. This called for a further 2000 MW of
electricity. It stipulated no generation technology preference but What about storage?
made it clear that bidders would have to be able to supply power to Energy storage is difficult to characterise. It is usually characterised as
the grid by October 2022. a generation element but is in fact also a load. Storage is useful as a
The latest, and perhaps most exciting development in the load-balancer. It can be used to increase load during times of surplus
liberalisation of South Africa’s energy sector, was the surprising and generation and reduce load (by meeting load directly) when generation
unexpected announcement by President Cyril Ramaphosa that the capacity is limited.
threshold for requiring an electricity-generating licence would be It has been suggested, probably most sensibly, that storage
increased from 1 MW to 100 MW “within 60 days” of his announcement capacity should be measured at the point of connection of the inverter
on 10 June, this year. – rather than the battery – since the battery’s level will change as it
“Government has decided to amend schedule 2 of the Electricity charges and discharges.
Act to raise the threshold for self-generation from 1 MW to 100 MW”, Finally, although this liberalisation is exciting and is good news for
the president said. the country, there are still uncertainties around the regulations, which
could delay the uptake of new generation and energy storage for
Benefits of liberalising the electricity sector both on- and off-grid use. We hope these will be clearly defined in the
By including the private sector in the generation of electricity, the amendments to Schedule 2 of the Electricity Act. n
government is allowing for least-cost power procurement, a rapid
increase in the amount of additional power available to consumers, Send your comments to rogerl@nowmedia.co.za

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