The market for small scale electricity generation has finally been opened up in South Africa with the long awaited amendments to the Electricity Regulation Act (ERA) published on 10 November 2017.

The amendments exempt facilities with an installed capacity of less than 1 MW from the obligation to obtain an electricity generation licence, provided that the facility has only one customer, enters into a connection and use of system agreement with the licenced distributor into which the facility as a whole interconnects, and the facility registers with the National Electricity Regulator of SA (NERSA).

This means that rooftop solar installations can lawfully be installed by a third party supplier and the supplier can lawfully enter into a power purchase agreement with a customer.  Such facilities can also supply back to the municipality without a generation licence.  Previously this has been constrained by the very limited “own generation” exemption in the chedule to the ERA.

The amendments also create a legal framework for “wheeling” agreements for small-scale generators in terms of which a customer located some distance from a small-scale generator can purchase electricity from the generator and the electricity can be “wheeled” over the municipal system to the customer. Again there is an obligation in the amendments that the facility has only one customer, enters into a connection and use of system agreement and wheeling agreement with the licenced distributor or transmitter over which system the power will be transported and that the facility registers with NERSA.

This change in the ERA has long been anticipated but has been significantly delayed by the policy uncertainty within the Department of Energy over the last couple of years.  The final publication of the amendments is likely to be a response to the increasing pressure that municipalities who want to proceed with programmes for small-scale embedded generators have placed on the Minister of Energy and NERSA in the last year.  The City of Cape Town has even gone so far as to approach the High Court for an order that it may proceed with purchases from small-scale embedded facilities. Read the article here.

These amendments to the ERA now enable the finalisation of the NERSA policy governing small embedded generation projects which should finally make it possible to obtain financing to roll these projects out on a large scale.

The amendments to the ERA also clarify the position for “resellers” such as townhouse complexes and industrial complexes confirming that no distribution licence is required for such resellers provided the price is the same as the relevant regulated tariff, the reseller has an agreement with the relevant distributor and the general conditions of service are approved by NERSA.

For more information, please contact Claire Tucker.