One of the structural reforms that Business Leadership South Africa (BLSA) has been campaigning for took a big step forward last week. The Department of Mineral Resources and Energy published a new Annex 2 of the Electricity Regulation Law.
This has the potential to stimulate significant new investments in electricity generation and make an important contribution to stabilizing the electricity supply. It is estimated that 10GW of generation could be built in the next seven years (about a quarter of current supply) with more than R150 billion of new investment. Some of the existing capacity will be released immediately and could be quickly available over the network.
The official publication means that energy-intensive companies can now go ahead with their own electricity generation plants. The only bureaucracy they have to deal with is the need to register with the National Energy Regulator of South Africa (Nersa), although plants created solely as a backup supply in the event of a disruption do not have to.
We don’t know yet what registration will require, but we hope it will be a simple process. This shines a light at the end of the tunnel for many companies that have been severely affected by downtime and lost production due to falling cargo. It opens the way for new investments that could not be made before due to power supply limitations.
The modified schedule also allows for the first time to cross the grid.
This means that companies can generate in one place and then use electricity in another place.
That’s particularly important for renewable energy generation, where the sun is shining and the wind may not be where the electricity is needed. In addition, the modifications allow companies to buy from third parties.
All of this will require businesses to deal with Eskom as a transmission operator and much will depend on how simple and cost-effective Eskom can be in offering this service. Municipalities will also need to play a role when their infrastructure is used for final delivery.
The modified schedule is not perfect.
There are several ambiguities that will need to be clarified. The timeline appears to allow many end-users to go from one producer, but the language is unclear on this. It also appears to exclude municipalities as electricity resellers, which can make it difficult for municipalities to buy directly from private producers. It is also unclear how energy storage will be dealt with when producers create battery capacity to store the energy produced. Further amendments to the agenda to clarify these issues would be appreciated.
The ball is now in the court of Nersa and Eskom. It is important that they use the regulatory space to allow for self-generation and widespread sales throughout the network. We will continue to push for this to happen.
The amendments are a clear success of Operation Vulindlela, the project created between the National Treasury and the Presidency to promote structural reforms. This success goes a long way toward improving business confidence that the other reforms promised by the president will become reality. As confidence increases, companies will begin to take an improved perspective into account in their investment decisions. That unleashes a virtuous circle, the one we have been arguing for and that structural reforms will allow.
Vulindlela’s other priorities are the divisionalization of Eskom (which will improve the management of the wheels, among other benefits), the auction of additional spectrum to improve digital broadband access, the bulk water infrastructure, the expediting of licenses. of water use, the corporatization of the National Port Authority of Transnet. , third party access to rail infrastructure, visa reforms and others. If all of this were to be achieved, the improvement in the business operating environment would be significant. It would make South Africa a much easier place to do business and therefore to grow the economy, increase employment, and generate the revenue that the government needs to fix its financial situation.
BLSA will continue to work to help the government make these changes and take advantage of the opportunities they present.
Busi Mavuso is CEO of BLSA