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Embedded generation could help alleviate energy crisis in SA, says IEA

Embedded generation could help alleviate the ongoing energy crisis in South Africa in the short-term, according to a new report by international energy experts. Photo: EPA/KIM LUDBROOK

Embedded generation could help alleviate the ongoing energy crisis in South Africa in the short-term, according to a new report by international energy experts. Photo: EPA/KIM LUDBROOK

Published Jan 17, 2022

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Embedded generation could help alleviate the ongoing energy crisis in South Africa in the short-term, according to a new report by international energy experts.

The International Energy Agency (IEA) on Friday said that the new policy might help address capacity issues in the short term as licensing obligations for embedded generation have been relaxed.

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In August last year, Mineral Resources and Energy Minister Gwede Mantashe gazetted rules allowing licence exemptions for the generation and operation of 100MW of power.

This means that the licence threshold has been lifted from 1MW to 100MW, which would allow private companies to build their own generation facilities.

The IEA said this policy would ease the strain on the grid as demand for electricity was picking up on reopening of the economy.

“The broader impact of this announcement on demand remains to be seen, however, as a country with a major energy shortage, South Africa could expect to see a boost in demand as capacity issues are alleviated by projects built outside the traditional auction process,” it said.

The country continues to struggle with capacity shortages that have plagued its electricity system since 2014, caused by declining availability of its ageing coal fleet and delays to two large new-build coal plants.

The ongoing capacity shortages have led to declining electricity demand as persistent load shedding has become the norm over recent years.

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Last week, Mantashe said his department had completed procurement of 6 422MW of renewable energy through four bid windows, with at least 5 422MW already connected to the grid by the end of June last year.

“Furthermore, the Risk Mitigation Independent Power Producer Procurement Programme for 2 000MW is expected to close by the end of this month,” he said. Mantashe also said that plans were under way to extend the lifespan of Koeberg by 20 years.

“In this regard, as approved by our Cabinet too, we will proceed with the implementation of 2 500MW of nuclear, at a scale and pace affordable to South Africa,” he said.

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In a separate note, the IEA also said that surging electricity demand was putting power systems under strain around the world.

Global electricity demand rose by 6 percent last year, the largest in percentage terms since 2010 when the world was recovering from the global financial crisis.

This demand was driven by the rapid economic rebound and more extreme weather conditions than in 2020.

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Back home, electricity supply constraints continued to weigh on economic activity.

Statistics SA last week showed that generation and distribution of electricity contracted by a further 3.7 and 2.4 percent, respectively, in November last year.

Investec economist Lara Hodes said that the country‘s electricity supply woes continued to remain a key drag on gross domestic product potential, with Eskom's generation business plagued by ageing infrastructure and a history of poor maintenance.

“The pandemic has had a devastating effect on businesses and while an easing of lockdown restrictions has seen electricity demand pick up,” Hodes added.

“The utility has applied to Nersa for a tariff increase of 20.5 percent for the 2023 financial year, which will weigh heavily on already financially constrained households.”

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