Licensing exemption to spark further investment in renewables

In a notice published in the Government Gazette on Friday November 10, independent generators of up to 1MW of electricity have been exempted from the legal obligation to be licensed.

This means that owners of embedded renewable generation facilities will not be subject to the administrative and financial burden of obtaining a generating license from the National Energy Regulator (Nersa) and the development might speed up further investment in, for example, solar photovoltaic (PV) installations.

Such generators will however have to register with Nersa.

The department has also given notice that electricity resellers will in future need to register with Nersa, which should make it easier for the regulator to curb over-charging of end-users.

The exemption applies to generators of up to 1MW who are connected to the national grid and supply a single customer without wheeling (transporting) the energy through the grid, as well as wheeling it to a single or related customer.

Generators of up to 1MW of electricity for own-use or a related person or customer on the same premises who is not connected to the grid are also exempted from licensing, as are demonstration plants and back-up generators. They also need to register with Nersa, as do industries that generate electricity as a by-product of their main activity or from waste.

The exemption is subject to the maximum amount of embedded generation capacity in the integrated resource plan (IRP). The IRP sets out the future energy mix of the country and is currently being finalised. It is not clear whether there will be a cap on embedded generation.

As is currently the case, electricity resellers will, in terms of the notice, not be permitted to charge end-users more for electricity than the tariff the same customer would have had to pay if he/she bought electricity directly from the licensed distributor in that area.

Many sectional title complexes, shopping centres, industrial parks and office buildings make use of resellers to distribute electricity internally beyond the bulk supply point.

Sectional title owners and tenants pay the reseller at a rate that should be equal or less than the rate they would have paid if they bought directly from the local distributor, which is usually the municipality or Eskom.

In terms of the notice, resellers would be required to enter into an agreement with the local licensed electricity distributor to regulate their relationship and Nersa will have to approve the general conditions of service delivery.

AgriSA has welcomed the notice, saying it enables smaller scale renewable energy projects to generate power not only for own-use, but also for the benefit of industries such as the farming sector.

“The large-scale roll out of solar installations has helped to reduce the cost of solar technologies and improved cost-competitiveness in recent years. In addition to the clear environmental benefits, the use of independent solar energy can contribute to cost savings for the user as well contribute to developing a domestic solar industry value chain,” AgriSA said in a statement.

“For these reasons, the use of solar power holds specific potential in the farming industry. Farmers can install their own PV infrastructure to reduce their carbon footprint while also saving on electricity costs.”

According to AgriSA the licensing requirement has, until now, hindered farmers with PV installations from connecting to the grid.

After the publication for comment of the draft regulations in December last year many farmers have however, in anticipation of the exemption, begun investing in constructing solar photovoltaic (PV) on their properties, says AgriSA.

“According to energy consulting firm, Sonfin, the investment in solar projects by their farmer clients amounts to about R200 to R350 million to date. According to Nedbank, they have provided about R50 million in finance for renewable energy projects in agriculture over the last three years. Of this, 20% (R10 million) was for projects that were affected by the delay in finalising the licensing exemptions. Holding and other costs associated with not being able to lawfully connect to the electricity grid due to the delay in the entry into effect of the draft exemptions caused significant financial losses to the industry,” says AgriSA.

Energy expert Eric Bott, who is the technical director at Energy Measurement Consulting, has also welcomed the notice.

He says it will serve to allow the development of the embedded generation industry while protecting the sustainability of the national grid. The registration of the installations will enable Nersa to get a broad view of the size of the industry and developing trends and inform electricity demand forecasts for Eskom and municipalities.

He says the removal of the obligation to license smaller embedded generation installations will be a huge step forward for, for example, shopping malls looking at self-generation through rooftop solar PV installations.

Bott says the registration of electricity resellers is long overdue. He says over-charging is rampant in this industry and until now end-users have had little recourse.

Nersa will in future be able to withdraw the registration of resellers that prejudice end-users and are currently “a bigger problem than Eskom”, Bott says.

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