South Africa’s energy regulator just approved the first two private 100MW generation projects

The National Energy Regulator of South Africa (Nersa) has registered two new 100MW solar projects.

It follows the landmark regulatory change announced by president Cyril Ramaphosa in August 2021, where Schedule 2 of the Electricity Regulation Act was amended to extend the limit over which a private power project must apply for a Generation Licence, from 1MW to 100MW.

The two projects are located in the North West and will generate power for Tronox Mineral Sands. Both projects are being developed, financed, constructed and operated by the Sola Group.

The registration of the projects took 73 days from submission.

“The significance of this first move is that it will pave the way for many more large scale private projects to receive approvals to be able to contribute to generation capacity to the grid,” said Dom Wills, CEO Sola Group. “Further, this is a clear signal to the market that private power is achievable and there are private funders that are excited to finance this market.”

Sola’s largest shareholder and equity partner in the projects, African Rainbow Energy, CEO Brian Dames, said: “At the recent South Africa Investment Conference, African Rainbow Energy committed to invest R3 billion in the economy. These projects are starting to realise this commitment as well as the African Rainbow Energy’s commitment to use new technology to provide large scale clean power solutions for the economy.”

The projects have also received significant assistance from the presidency, who are keen to see the impact of the new legislation, he said.

Following this registration, the expected financial close of these projects is in July, following which the projects will require a construction period of 14 months in order to reach Commercial Operation Date. The projects have an expected lifetime of 30 years.

The projects are also making use of the electricity wheeling framework, enabled by Eskom. Under this mechanism, the energy can be produced by an IPP in one Eskom-connected area, and sold to their client in other Eskom-connected areas. Eskom charges a wheeling fee in order to facilitate this bilateral energy trade.

“The advantage of the wheeling framework is that it allows perfect solar regions to be developed and used to provide power to perfect industrial and mining regions,” said Wills. “A perfect solar region is a flat area, with high solar resource, very little environmental or social impact, uncomplicated underground conditions and has access to a strong grid node with good power evacuation potential.”

Large scale bilateral energy trading is the first step in South Africa’s plan to ultimately open up the grid to allow more flexible electricity trading. Draft legislation has been released which signals the intent to have a consolidated central purchasing agency allowing electricity traders to sell energy using the grid as a conduit, Sola said.

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