South Africa


Increase to 100MW embedded generation threshold will give ‘oomph’ to South African economy, says Ramaphosa

Increase to 100MW embedded generation threshold will give ‘oomph’ to South African economy, says Ramaphosa
President Cyril Ramaphosa. (Photo: Simon Dawson / Bloomberg via Getty Images)

Hard on the heels of Stage 4 rolling power outages, President Cyril Ramaphosa on Thursday announced a 100MW cap for embedded generation. The surprise announcement of a hundredfold increase from the 1MW threshold was widely welcomed.

It’s a big announcement. On the policy front, it is a significant shift towards power generation outside state-owned Eskom that also comes with an option to send the surplus into the national grid. On the political front, it is a significant slapdown of the Department of Mineral Resources and Energy that dug in at a 10MW threshold, rather than the minimum 50MW business had wanted. 

Within 60 days — hopefully sooner rather than later, according to President Cyril Ramaphosa — new regulations will be gazetted to exempt embedded generation projects up to 100MW from having to apply for licences from the National Energy Regulator of South Africa (Nersa). 

“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,” said Ramaphosa, talking about economic reconstruction and recovery. 

Crucially, these embedded projects would be able to send — or “wheel”, in the technical jargon — surplus energy to the grid, subject to possible charges and connection agreements with Eskom and municipalities to ensure regulatory compliance and system stability. 

That’s where Eskom’s unbundling becomes important — and the December 2021 deadline for legal separation of the transmission entity that would be in charge of the national grid.

Details remained scarce on Thursday. It would depend on companies and proposals of how much additional power would be generated, said Mineral Resources and Energy Minister Gwede Mantashe during the briefing. But it seems that 5,000MW embedded power is a consensus figure in government, business and energy analysts’ circles.

“There is no doubt that the prospect of a continued energy shortfall and further load shedding presents a massive risk to our economy,” said Ramaphosa. 

“Our ability to address the energy crisis swiftly and comprehensively will determine the pace of our economic recovery. Resolving the energy supply shortfall and reducing the risk of load shedding is our single most important objective in reviving economic growth.” 

The devil as always is in the details, in this case in a couple of throwaway lines in the presidential statement. 

“Breaking bottlenecks” was one of those, “Operation Vulindlela” the other. Together they signal the Presidency is behind this. 

Operation Vulindlela, the joint initiative between the Presidency and National Treasury, is fundamental to the structural reforms identified as central for South Africa’s economic reconstruction and recovery. 

Additional energy generation, spectrum auction and critical skills have long been identified as urgent reforms at the National Economic Development and Labour Council and in the Economic Reconstruction and Recovery Plan Ramaphosa launched in mid-October 2020 in Parliament. 

Ramaphosa can’t move on spectrum auction to free up broadband because of pending litigation, even though he’s called on parties to try to resolve the dispute

Neither can Ramaphosa move on critical skills and visa reforms as these seem bogged down at Home Affairs, and various seemingly endless rounds of consultations. 

But upping electricity generation has been part of Operation Vulindlela’s focus from the outset “to establish additional generation capacity as quickly as possible to reduce the risk of load shedding and enable economic growth”, as the unit’s info booklet puts it. 

Ramaphosa’s announcement has now made this a reality. It will test Operation Vulindlela, and by implication the Presidency, both technically — additional power generation is somewhat more complicated than cutting water use permit applications to 90 days — and politically, even if Mantashe downplayed any pressure. “When the president twisted my arm… I ultimately agreed,” he said.  

On Tuesday, Ramaphosa was clearly prepared for the political comeback. Eskom needed time for its maintenance programme, but bold action was needed, “not yesterday, but now” to ensure energy stability. 

“South Africa will emerge as winner. Eskom will emerge as winner, inasmuch as some will argue we are taking bread from Eskom… Eskom remains in charge. If you want to transmit, you do that over the Eskom grid.” 

Whether such political pre-emption will work remains to be seen, but Cosatu seemed to give it a chance. In noting the announcement, the labour federation said it hoped the announcement would “spur investment in additional power generation”. Cosatu, however, was disappointed that no immediate measures were announced to address the present crisis of rolling power outages. 

“The lack of reliable and affordable energy threatens millions of jobs in mining, manufacturing, agriculture and in fact in all sectors. Electricity tariff hikes far above inflation year after year rob workers of their already diminished wages.” 

Eskom welcomed the lift of the embedded generation threshold to 100MW. 

“Eskom has been lobbying the government for this limit to be increased. This has now happened, and will in time help reduce the pressure on Eskom and make more electricity available to the country,” said the power utility’s spokesperson, Sikonathi Mantshantsha. 

“It is a great step Eskom welcomes. The reality, though, is that it will still take some time for those investments to start delivering.” 

On Tuesday, Business Leadership South Africa (BLSA) had called for the implementation of the Economic Reconstruction and Recovery Plan’s key points — including energy security — after raising “concern” over the slow pace of overall economic recovery amid shrinking investment.

Intellidex analyst Peter Attard Montalto said the raising of the embedded power threshold was “a massive win” for Operation Vulindlela and more important than the issue itself. 

“It is also a major overruling of Minister Mantashe by the president, given the energy crisis — again a bigger and more important point than just the threshold issue.” 

Support for the move also came from political parties. 

DA MP and mineral resources and energy spokesperson Kevin Mileham said the opposition party would hold both president and minister to the 60-day deadline for the amended schedule to allow increased embedded generation. 

These amendments must be actioned and implemented without delay as it has the potential to free up and encourage investment in the electricity generation sector and ease demand on the grid.” 

Freedom Front Plus MP Wynand Boshoff welcomed the announcement as “an important step” for fully competitive power generation in South Africa. “It is no secret that power shortages are the greatest obstacle to economic growth and job creation in South Africa.” 

The ANC also welcomed the announcement as it was in line with its energy security policy, according to the governing party’s spokesperson, Pule Mabe, speaking on SABC. 

Outa, or Organisation Undoing Tax Abuse, said the president had “overruled” Mantashe, and described the presidential announcement as “a stronger commitment to reforming the energy sector”. 

Hopefully, the Outa statement added, it would also be an “opportunity… to drive the manufacturing industry, which will help the economy get back on its feet”. 

Eskom’s outlook indicates regular rolling outages until at least December, easing somewhat until March 2022. Over the past week, in addition to 1,273MW taken off the grid for planned maintenance, about 15,000MW had dropped out due to breakdowns, according to the power utility’s alerts. 

That’s a shortfall of anything between 1,000MW to 3,000MW. 

On Wednesday Stage 4 load shedding was announced amid the planned maintenance plus 15,087MW breakdown losses “to ration the remaining energy generation reserves which have been depleted”, according to Eskom’s power alert. 

Thursday’s presidential announcement, significantly upping embedded generation to 100MW and introducing the option to send unused power into the national grid, was dressed up in hope, progress and moving South Africa forward. 

“Many funders are willing to come to the fore to fund the energy solutions,” said Ramaphosa. “We have a bright future ahead of us. We just need to manage ourselves out of this crisis.” 

The pretty words strategically shield what’s at stake for the president, the Presidency, National Treasury — and Operation Vulindlela. It’s a high-stakes political gamble following an important governance shift to concentrate power in the Presidency and to unblock bottlenecks. 

Ramaphosa on Thursday was upbeat: “We are giving oomph to the economy of our country.” DM


Comments - Please in order to comment.

  • C. M. says:

    The president doing the job of a minister. Surely this a signal of the end of Gwede? One can hope! And I hope the opposition and the media hold the ANC accountable to this deadline, no more compromises.

    • Coen Gous says:

      Agree 100%. In an article on News24, Mantashe and his cronies in his department, were dead set on raising the threshold to more than 10MW. In fact, he claimed that in a survey of more than 10000, the public opinion was for 10MW. There was no survey, and he lied. Gas powerships (in which he might have a direct interest), coal, that’s what he want. This despicable minister, deeply embroiled behind the scenes in State Capture, is also the Chairman of the ANC top six. And trust me, he will try and stall this new proposed threshold. Lets see if the 60 days before publishing in the government gazette will be adhered to. Perhaps Mantashe is hoping the Eskom will completely fall to pieces before then, which, based on events over the last 2 weeks starts to look very likely.

    • P G Muller says:

      ….there will be another twist in this process…uncle Gwede MBA has only one arm twisted……let’s not hold our breath!

  • Peter Doble says:

    A ray of hope in a lightbulb moment! The blindingly obvious has touched a nerve. Let’s all hope it isn’t a generation too late.

  • Miles Japhet says:

    If the broad definition of property in the proposed EWC legislation, goes through then an interesting scenario presents itself.
    Get the private sector to build more generating capacity and then once complete, trigger EWC and this capacity then belongs to the nation!!!

  • Peter Bartlett says:

    A few take-aways from the “[It’s a] big announcement” and to dispel some of the “oomph” that’s quite honestly, far too little and far too late!

    . . . it is a significant slapdown of the Department of Mineral Resources and Energy . . .

    Within 60 days — hopefully . . . — new regulations will be gazetted . . .

    Crucially, these embedded projects would be able to send — or “wheel” — surplus energy to the grid . . .

    . . . subject to possible charges and connection agreements with Eskom . . .

    Details remained scarce . . .

    . . . the prospect of a continued energy shortfall and further load shedding presents a massive risk to our economy,” said Ramaphosa. (. . . no shit, Sherlock)!

    Ramaphosa’s announcement has now made this a reality. (. . . and we’re supposed to believe it? REALLY!!!)

    . . . even if Mantashe downplayed any pressure. “When the president twisted my arm… I ultimately agreed . . . (He should have had his neck twisted and his sorry ass kicked right out; as the single biggest cause of, and obstacle in, the ongoing SA power crisis)

    . . . but bold action was needed, “not yesterday, but now” to ensure energy stability. (. . . pull the other one . . . we’ve heard this all before!)

    . . . and my best was; but “Eskom remains in charge”!!!

    I could go on, and on, and on . . .

    100MW is 48 Madupi’s, it’s also 48 Kusile’s and we’d need 150 more just to cover last week’s breakdowns plus 12 more to allow for planned maintenance; that’s more than 250 new 100MW-capable embedded generation units as quoted next!

    “. . . over the past week, in addition to 1,273MW taken off the grid for planned maintenance, about 15,000MW had dropped out due to breakdowns, according to the power utility’s alerts”

    Let’s get real, people; the only good to come out of this announcement was that it was a “. . . significant slapdown of the Department of Mineral Resources and Energy” and one which Uncle Gweezie richly deserved 😊

    • Daniel Sapsford Sapsford says:

      You got your numbers wrong.

      • Coen Gous says:

        Daniel please explain the numbers

        • Charles Parr says:

          The figures are the wrong way around. Medupi and Kusile each have a design capacity of 4800 Mw so each should be 48 times the size of a 100 Mw unit.

          • Coen Gous says:

            Thx Charles….With all these numbers so critical to having the lights on or not, it becomes vital that Eskom now provides us with daily updates on the numbers in Mw terms. Already is is difficult to understand the Covid 19 statistics….number of new cases, number of new deaths, number still active, broken down by province, and municipality. I guess then we should hope that some one, somewhere, and many of them, has the capacity/money to each produce 100Mw. Heck, maby its time I start to pay attention to the usage numbers in my monthly Eskom Account, especially as they charge more, the more you use. What I do understand about the numbers, is that my monthly payment number increased by large numbers over the last 10 years or so

  • Hermann Funk says:

    Ramaphosa still demonstrates a lack of backbone. He only made this decision because his back was/is to the wall, yet refrains from firing a minister whose incompetence and total lack of insight substantially contributed to the mess we are in.

  • Trevor Pope says:

    A rather rare outbreak of common sense. Looking forward to more interventions by uncle Cyril – quite a few examples come to mind: police, trade and industry, home affairs, health, tourism, labour, local government, … Thinking about it, are there any ministries that don’t need attention?

  • Mike Barker says:

    𝙋𝙤𝙬𝙚𝙧 𝙩𝙤, 𝙛𝙤𝙧, 𝙖𝙣𝙙 𝙗𝙮 𝙤𝙪𝙧 𝙋𝙚𝙤𝙥𝙡𝙚

    It’s time for the #StokvelMicroGrid
    – watch this YouTube video – “We the Power Official Trailer | The Future of Energy is Community-Owned”

  • Gerrie Pretorius Pretorius says:

    What a lekka green snot-klap to gwede and his communist thinking. But I have a concern – “If you want to transmit, you do that over the Eskom grid.” Is this just a way of saying “We, the anc, are still in control. If you want to generate your own electricity you will still need to pay us …”.
    I also look at the pylons and high voltage power lines’ neglect over decades and wonder when that disaster will strike. Kilometers and kilometers of lines coming down because of rust fatigue.

  • Gerhard Pretorius says:

    A step in the right direction if this can be realised. The devil is indeed in the detail. Will this concession be limited to the private sector, or can progressive municipalities also jump in?

  • Janyce Dalziel says:

    At last CR has given Gwede a kick in the right direction. Its long overdue and hopefully signals Gwede is on his way out.

  • Marco Savio Savio says:

    …and keep those stupid energy generation ships out of our harbours! Oh, and I almost forgot, I miss the past radio station humour from Sikonathi Mantshantsha :))

  • Shaun Mbhiza says:

    Can’t wait to read the gazzete. Hopefully it’ll give incentives to those going green.
    Think, tax breaks if Company X sets up solar/wind farms.

    If anything this shows how fragmented the government is. This along with other dicisions affects at least 2 departments at a time.
    Electricity – Enterprise and Minerals departments.
    Skills visa – Labour and home affairs.

  • JP van der Merwe says:

    The cover story of this week’s Economist is quite relevant here.

    • JP van der Merwe says:

      “As the world economy wakes back up, shortages and price spikes are affecting everything from the supply of Taiwanese chips to the cost of a French breakfast. As we explain this week, one kind of bottleneck deserves special attention: the supply-side problems, such as scarce metals and land constraints, that threaten to slow the green-energy boom. Far from being transitory, these bottlenecks risk becoming a recurring feature of the world economy for years to come because the shift to a cleaner energy system is still only in its infancy. Governments must respond to these market signals, facilitating a huge private-sector investment boom over the next decade that increases capacity. If they don’t, they stand little chance of keeping their promises to reach “net-zero” emissions”.

  • Colleen Dardagan says:

    Is this a hand up to pave the way for Creecy to turn down the power ships? Mantashe would eat Creecy for breakfast – but maybe she suddenly has an ally in the president. I sincerely hope so.

    • Coen Gous says:

      Creecy is one of the few in government that is worth her salt. Very brave and bright lady, as I discovered during the Life Esidemeni hearings a few years ago. I doubt if she would let herself be intimidated by Mantashe, and in fact can easily be the minister of energy. However, she is White, and thus not really an option, with the ANC by and large racist

      • Alley Cat says:

        HMMM??? I would have agreed with you, but she initially approved the EIA emergency waiver for the karpower ships??
        She said she “was misled” THAT is not competence!

  • Dieter Butow says:

    Another decision in desperation – worse than crisis management. This decisions has been overdue for 10 years.

  • Charles Parr says:

    It’s a pity that government is doing away with S12J investments as solar plants would be ideal for that.

  • Robert Morgan says:

    To paraphrase the Mighty Pythons: “Oomph”? “Oomph”?!? Mate, this bird wouldn’t “Ommph” if you put four million volts through it! ‘E’s bleedin’ demised!

  • Glyn Morgan says:

    I think it went trough because ESCOM is breaking up, ready for a total collapse.

  • Tim Price says:

    Shockingly late announcement from the party trying desperately to completely wreck the country…#voetsekANC

  • Diablo DC says:

    Mantashe must be shown the door. Along with all the ANC Cadre geriatrics. Make space for open minded, qualified, intelligent youth.

  • Richard Thompson says:

    Why 60 days? Surely the regulations remain as they are with a one-sentence amendment? Unless, of course, it takes 60 days to write in all the T’s & C’s and BEE requirements that nullify this in practice.

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