EDITORIAL: Electricity wheels are moving — but slowly
New projects will take years to come online, so let’s do everything we can to speed up the process
It’s been more than four months since the department of energy said last October that it would move to procure “emergency” energy capacity to meet the gap in demand it knew was going to arise. The idea was to look for short-term solutions that could be brought online in three to 12 months.
However, it took stage 6 load-shedding and almost two months before mineral resources & energy minister Gwede Mantashe finally acted to say he would procure more energy. Mantashe said he would make new energy determinations under the Electricity Regulation Act; initiate a request for information from the market on possible short-term measures; and he would meet the National Energy Regulator of SA (Nersa) to get its concurrence on clearing the way for companies and mines to enable self-generation of electricity.
President Cyril Ramaphosa repeated all the measures announced by Mantashe in his state of the nation speech in February. But as SA stumbles through a week of stage 4 load-shedding, it does seem as if SA is hardly any further along the way to procuring new energy.
Thankfully, it is not completely true. Despite reluctance on the part of Mantashe to be seen politically as favouring independent power producers, the wheels have begun to move behind the scenes. The progress, though, is frustratingly slow.
As promised he has, under the Electricity Regulation Act, produced two section 34 determinations, which he passed on to Nersa in mid-January for its concurrence. The first is a determination to procure the emergency generation. The second is a determination for renewable energy. These determinations are necessary before new power can be contracted.
Nersa, unfortunately, is yet to kick off the process of “concurrence”, for which it needs to hold public hearings. The department of energy told Engineering News last week that it expected this process to take between three and six months. This means that these options, whatever they might be, are likely to be commissioned only well into the second half of the year. That means that “the emergency” procurement spoken of in October could take a full year before a contract is even signed.
After that the successful projects — proposals have been made for gas, coal and renewable generation — will need several months, probably a lot longer, to move to financial close. To do this includes solving difficult problems: has Eskom got the capacity and funds to connect the new projects to the transmission grid? Who will sign and guarantee the power purchasing agreements now that Eskom is in such trouble?
After that the build can begin. For solar this is a minimum of 18 months; for wind it is two years. The same timescale is true for bid window five of the renewable energy independent power producer programme.
Ever so slightly more progress has been made on the self-generation option. Here, Mantashe must gazette a change to the regulatory environment for self-generation. This, say department sources, is almost complete. However, a licence to do this will still be required, as it is now. While Mantashe had said that the licensing would be scrapped for self-generation, this was mistaken. As self-generation will mean in almost every case that the entity remains connected to the grid and even uses it to wheel the power to related parties, a licence will still be required.
As this is the easiest and quickest part of the puzzle to get right, it is vital that both the department and Nersa get ready to process these applications, with the right forms to be completed and the right personnel with the right knowledge. We are already in for a wait of several years before the first projects are up and running. The government and Nersa need to do everything they can to speed up the process. Until then, let’s hope for more stage 2 and less stage 4.