A new survey by Meridian Economics shows that lifting the licensing threshold to 50MW for self-generation or distributed-generation projects in South Africa would unlock 5GW in additional energy capacity in the next 5 years. This could go a long way in assisting Africa’s most industrialised nation in mitigating its current power crisis and improving energy supply and security.
The survey was conducted in December / January 2020/21 by EE Business Intelligence at request of Meridian Economics. It was aimed at municipal, public sector, commercial, industrial, mining and agricultural customers of electricity in South Africa; developers of distributed renewable energy (RE) installations to these sectors; Independent Power Producers (IPPs), for either on-site generation by or for a user of electricity or off-site generation for wheeling across the grid between a generator and a user of electricity. The survey excludes RE installations by Eskom or RE installations under the REIPPP programme of the DMRE IPP Office.
Self-generation could unburden Eskom
South Africa has been experiencing persistent power shortages as a result of the Eskom ageing generation coal fleet which no longer performs at its optimum capacity. The series of load shedding events have negatively affected the nation’s economic performance with the utility being branded the biggest threat to South Africa’s economic growth prospects. South Africa’s economy went into recession for the past 2 years with Eskom being one of the major culprits.
The survey by Meridian economics shows that if the licencing threshold was lifted to 50MW or higher, it is likely that there will be significant additional uptake of distributed generation in South Africa. This would significantly reduce the burden on Eskom whose power generation capacity is currently overwhelmed and can not guarantee consistent power supply to enable South Africa to meet its economic development objectives.
“Based on survey responses, calibrated by estimates by other researchers and relevant international experience, we make a conservative estimate that at least approximately 5 000 MW of additional capacity could be unlocked over the next five years in residential, commercial, industrial and agricultural sectors,” says Meridian Economics’ Dr Grové Steyn and Celeste Renaud.
Red tape choking SA’s energy sector
The Council of Scientific and Industrial Research (CSIR) published a three-step load shedding recovery plan in 2020 aimed at highlighting mechanisms to mitigate power cuts and restore power system adequacy. The CSIR estimates that there is roughly a total of 3400MW of capacity that could be deployed by the end of 2022 but urgent regulatory reforms need to be implemented to unlock this capacity.
International trends have shown that loosening restrictive regulations and removing red tape can rapidly boost self-generation capacity particularly in the commercial and industrial sectors (C&I). Vietnam saw a 25-fold increase of rooftop solar capacity with over 7000MW of new energy capacity being deployed after loosening of regulations. In India, rooftop solar is the fastest growing sub-sector of renewable energy generation, demonstrating a compound annual growth rate of 47% from 2016- 2019.
By removing red tape and ensuring policy certainty, South Africa will have the opportunity to increase the uptake of self-generation renewable energy systems and reduce the energy supply burden on its capacity constrained utility Eskom.
