Out-Law News 1 min. read

South Africa weighs ‘game-changer’ energy generation licensing reforms

South Africa’s Department of Mineral Resources and Energy (DMRE) has published “game-changer” proposals to reform the country’s energy generation licensing regime.

The draft regulations, published in the Government Gazette No. 468453 earlier this month, propose amending the 2006 Electricity Regulation Act (ERA) to remove the embedded generation licensing threshold. While the exemption previously only applied to generation facilities with a capacity of 100MW or less, the proposed change would remove this restriction, exempting instead generation facilities of “unrestricted capacity”. 

It comes after South Africa’s president, Cyril Ramaphosa, announced a series of measures to help tackle South Africa’s energy security crisis and encourage private investment in electricity generation in July. Emma Roberts of Pinsent Masons said: “The publication of the draft regulations shows a willingness to implement the policy reforms announced by the president earlier this year – certainly in respect of removing licensing red tape.”

She added: “Once promulgated, the lifting of the licensing requirement will most probably be a game-changer and intensify private sector participation in the generation of energy in South Africa.”

The draft regulations set out a list of electricity generation activities would become exempt from licensing and registration with the National Energy Regulator of South Africa (NERSA), including generation facilities that produce back-up electricity and those that have a capacity of 100 KW or less and have a point of connection, as well as those facilities that do not have a “point of connection”.

They also list electricity generation activities which – despite being exempt from licensing – must be registered with NERSA and comply with its various codes. These activities include the operation of any generation facility with or without energy storage, those with “unrestricted capacity” in the draft regulations, and those with a “point of connection” on the transmission or distribution power system. In certain circumstances, the trading of electricity by a reseller must be registered with NERSA.

The public participation period for consultation on the draft regulations ends on 3 October 2022.

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