President Ramaphosa announced on the 10th of June 2021 that the government will increase NERSA’s licensing threshold for embedded generation projects from 1MW to 100MW. As such projects under 100MW will be exempt from licensing requirements.
The good news from this announcement is that more players will be able to generate electricity. NERSA and the Department of Mineral Resources and Energy have all but killed the renewable energy potential of South Africa through regulation, suspending procurement, and policy that constrains renewables. In the face of their recalcitrant and anti-renewable governance, lifting the 100MW will help South African people and businesses to unlock our renewable energy.
Transitioning to renewable energy is vital for job creation and economic growth. A recent study showed how there is a backlog of over 100 renewable energy projects trying to secure government permissions. Together just that pipeline of projects could plug the load shedding gap, create over 100,000 local jobs, and reduce energy costs. Additionally renewables are vital to replace ageing and polluting coal power in the electricity system. Cleaning our electricity sector is an essential part of tackling climate change and reducing our greenhouse gas pollution.
We welcome some of the ways that lifting the licensing requirement will help unlock renewable energy. However, we are also concerned that this move might lead to widespread privatisation of the energy sector which disproportionately benefits wealthy corporations. In line with our coalition’s Green New Eskom campaign, we believe that energy policy should serve the ends of a rapid and just transition to a more socially owned, renewable energy powered economy, providing clean, safe, and affordable energy for all, with no worker and community left behind.
The proposed amendment to schedule 2 should be seen as a compromise move to get around the on-going corruption and power-mongering in defence of the incumbent energy system. The intervention is a symptom of and necessitated by the utter failure of Minister Mantashe and the DMRE to advance a sane and just energy agenda. Instead the DMRE advances an oft corrupt and polluting energy agenda, which often violates the rights of mining affected communities. For this reason, we as the Climate Justice Coalition are planning a nationwide mobilisation targeting the DMRE. More details available here.
In sum, while it is important to move forward with unlocking the potential for renewable energy, if not managed carefully the lifting of the 100MW licensing limit might run contrary to several elements of a just energy transition. We detail some of our concerns in the bullet points below, drawing from member inputs, statements and concerns around the change in regulation.
- Capital funding for embedded generation is high, making it more affordable by corporates and high- to middle- income earners which promotes privatisation of energy and excludes access by 60% of South Africans, that is, the poor. As such, policies must be put in place to ensure a more socially owned renewable energy future, so that our renewable energy future is not dominated by rich corporations and individuals.
- We must prevent a situation where high-income groups (including corporates) leave the grid to generate their own electricity, leaving low-income groups to pay for the grid. This will create energy slums as the poor will not be able to afford high tariffs and the grid will not be utilised or paid for. As such, we elevate our call for a Green New Eskom as a vital part of a just energy transition. Eskom must play a major role in rapidly building out a renewable energy future and the grid and distribution system needed to support it. Eskom must be tasked foremost with providing affordable, clean and reliable electricity to all, including full implementation and expansion of the Free Basic Electricity grant.
- We are worried that the transition to renewable energy is moving forward without proper plans in place for a just transition for workers and communities dependent on coal. The government must as a matter of urgency put such plans in place to ensure a truly just transition so that we are not leaving behind workers and communities in the transition.
- The embedded generation allowance is not exclusively renewable energy generation. It can open the way for the burning of polluting gas, diesel or other fossil fuels. We need to properly regulate our energy sector to avoid locking in more harmful, expensive and polluting fossil fuels. We are also concerned that the embedded generation might include incineration projects which are highly problematic for their GHGs as well as highly toxic carcinogenic air emissions that will impact on health.
- While lifting the licence might unlock more renewable energy, we must move forward much faster to ensure we act in line with needed urgency on climate change. As this report details, for South Africa to do its fair share of the Paris Climate Agreement target of keeping warming to 1.5°C, then the energy sector must phase out coal by 2033 and be fully decarbonised by 2035-2040. Young South Africans who will most feel the effects of climate change are calling for 100% renewables by 2030.
- While we welcome municipalities having discretion to approve grid connection applications in their networks, we are concerned about the transparency of these processes and opportunities for corruption and bribes. Municipalities must work to serve the ends of a just energy transition, which includes inclusivity, accountability and transparency in building out a more socially owned and just renewable energy future. Electricity distribution functions must be subject to participatory democratic governance.
- The requirements for grid compliance are unclear at this stage. Whereas other countries seem to be encouraging generation by allowing feed-in-tariffs, South Africa seems to be discouraging that. Feed-in-tariffs must be set in a way that allows Eskom to cover the costs of maintaining grid, distribution, and generation infrastructure. At the same time, feed-in-tariffs, grid connection costs, or tariffs should not be used to subsidise corruption and uneconomic and polluting power stations.
- We are also concerned that the inconsistency in tariff structures across the country including storage tariffs and new tariffs that may be imposed will exacerbate high and uneven tariff charges. The electricity tariff system should be made to subsidise those most in need – the poor. It should not, as it currently does, support big polluting corporations who benefit from lower electricity costs subsidized by ratepayers.