The 100 MW cap, good news for solar

The 100 MW self-generation cap, what you need to know

Taking many people by surprise, President Ramaphosa recently announced that the licence-exemption cap on self- or distributed power generation plants in South Africa would be raised from 10 MW to 100 MW. The new 100 MW cap is good news, and while there are complexities involved, overall, it is certainly a step in the right direction.

In this blog post, we will briefly explain what the 100 MW cap means and provide a few guidelines to understand how this can be leveraged by your business.

The 100 MW cap, why?

The intention with the 100 MW cap is to help alleviate the country’s electricity crisis by empowering more independent energy producers to produce their own electricity. It is well known that the electricity crisis has been affecting quality of life and progress in the country for more than a decade.

South Africa has an abundance of resources that can be used for power, so any move towards harnessing those is positive. Electricity production is regulated in South Africa. Therefore, this step involves a change to the legislative framework.

The 100 MW

The 100 MW cap, what does it mean?

In short, what this change means is that one is no longer required to apply for a licence to install or produce your own power up to a capacity of 100 MW (megawatts per hour) from the National Energy Regulator of South Africa (NERSA).

It was only a few months ago that the cap was raised to 10 MW. At that point, trade and industry called for a higher cap. Therefore, the 100 MW cap has been welcomed favourably. The thinking is that a liberalisation of the country’s energy licensing regime is the cheapest and quickest way to unlock new power capacity within a short time frame.

The 100 MW cap, what has not changed?

Despite the positive move of the increased cap, the license from NERSA is not the only approval required in the establishment of a grid tied system. There is still a connection application required for all systems, regardless of size, to connect to the local electricity distributor’s network. Of these, Eskom supplies approximately 60 – 70% directly, with municipal electricity suppliers making up the balance.

To quote the president’s speech “This will remove a significant obstacle to investment in embedded generation projects. It will enable companies to build their own energy facilities to cater to their own needs.” The operative words here are “their own.” This is because the requirements to apply for licenses to firstly wheel power through the grid and secondly, to sell excess power have not been removed.

Therefore, the change in requirements relating to the 100 MW cap only refers to how much power one may produce for oneself or one’s business without a license. However, New Southern Energy is able to assist with facilitating the licence process application should you wish to build a grid-tied system. Our team has many years of experience in this area.

The 100 MW cap, how can one use this?

Because coal and nuclear power are the domain of parastatals, the private sector is able to benefit from the opportunities presented by renewable energy sources. Given our sunny climate in most parts of the country, solar power is an excellent way to make use of this opportunity.

Solar power can be used to power your home, office, factory, farm or any other energy consuming property. Not only is solar kinder to the environment, it also makes financial sense. Most solar plants amortize themselves within 5 – 7 years. However, the lifespan of a solar system is generally 20 – 25 years. These metrics enable a long-term saving.

Furthermore, solar power is one of the most measurable ways to reduce a business operation’s carbon footprint. This approach is viewed favorably by many industry bodies and nations that import fresh produce and manufactured goods.

One could therefore leverage the 100MW cap by either building a micro-grid (off grid system) that includes components such as batteries or apply for connection to wheel through the grid. Even with a grid tied system, due to the increased cap, a far larger portion of pour daytime load could be supplied from solar, resulting in a far higher overall renewable supply penetration and significant savings.

Should you wish to understand this process in more detail, with a view to going solar, please contact our offices.