South Africa’s 100MW embedded generation policy could improve capacity – IEA

South Africa’s new embedded generation policy that allows plants that are smaller than 100 MW to connect to the grid for self-consumption, and for the sale of excess power to the grid could help plug the power generation capacity shortfall in the country, said the International Energy Agency (IEA) in its Electricity Market Report 2022.

South Africa is currently experiencing power supply challenges as a result of the shortfall in state utility Eskom power generation capacity, as well as constant breakdowns of the utility’s coal power generation fleet. Part of Eskom’s ageing coal fleet is earmarked for retirement before 2030, and will be replaced by renewables as part of the utility’s Just Energy Transition policy.

In a bid to bolster energy security, South Africa’s government last year amended Schedule 2 of the Electricity Regulation Act to allow private players to develop generation systems of up to 100MW without requiring licensing from the regulator, NERSA.

Several South African companies in the industrial and commercial sectors have already announced plans to build plants to power their own operations in response to this evolution in policy. 

The South African government is hoping the policy will help attract much needed investment in its energy sector. Government owned development finance institution, the Development Bank of Southern Africa (DBSA), launched its $200 million Embedded Generation Investment Programme (EGIP) as a response to government’s intervention to liberalise the embedded generation sector.

The introduction of large-scale power generation capacity through embedded generation is expected to help ease the power supply burden from embattled state utility, Eskom.

“South Africa could expect to see a boost in demand as capacity issues are alleviated by projects built outside the traditional auction process,” the IEA said.