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Department of Mineral Resources and Energy Minister GWEDE MANTASHE told delegates at the Investing in African Mining Indaba that government had conceded mining companies to produce energy for their own use, amid the country’s ongoing electricity woes.

Details on this process have however since been scant, with industry calling for additional clarity on the rules surrounding self-generation, including the arrangements for the wheeling of electricity and the licensing regime for such projects. Compiled by CHANTELLE KOTZE.

This article first appeared in Mining Review Africa Issue 4, 2020
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In his address, the minister said that his department, together with the National Energy Regulator of South Africa (Nersa), are in the process of gazetting a revised version of schedule 2 of the Electricity Regulation Act, which would enable self-generation to take place.

He added that these generation plants may only require registration and not licensing – creating a more open and enabling environment for large energy users to reduce the burden on the national grid by generating power to meet their own needs.

In the proceeding media briefing, the minister said that if the mining industry were to sell its surplus electricity, or wheel it into the national grid, then “these companies must have a license because the system must know who you are.” 

President Cyril Ramaphosa, in his State of the Nation address, said that while Nersa will continue to register small-scale distributed generation for own use under 1 MW in size (for which no licence is required), the government would also work towards ensuring that all applications by commercial and industrial users to produce electricity for own use above 1 MW, are processed within the prescribed 120 days.

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In a statement following the President’s State of the Nation address, Minerals Council South Africa CEO Roger Baxter said that the mining industry has a pipeline of energy projects totalling about 1 500 MW that could be brought on stream in the next nine to 36 months.

Of this, 600 MW is solar power projects, which will contribute further to a reduction in the industry’s combined carbon footprint.

What the mining industry is opting for at present is the lowest cost electricity option and the most efficient type of long-term electricity generation, given the long-term nature of mining, said Baxter.

Listen: Are mining companies able to generate their own energy?

Andrew Lane, Africa Energy and Resources Leader at Deloitte also welcomed the announcement by Mantashe saying the ability to self-generate electricity would be good for the mining industry in light of the country’s energy challenges and the industry’s need for reliable energy.

“Should the wheeling of electricity by these self-generators be allowed, the subsequent ability to sell excess electricity back into the national grid means that mining companies could [over specify] their power plants and thus remove themselves completely from the grid,” says Lane.

Moreover, Mantashe also made mention of the establishment of a second power generating entity “outside of Eskom”, as a means to take further pressure off Eskom.

While the minister did not provide much detail about the scope of new entity, he did mention that all energy sources, not just wind and solar, would be considered.

Should this come to fruition, and should this be privately-owned, Lane believes that it could provide much needed competition in the sector which may help drive down electricity prices.

Read more about the National Energy Regulator of South Africa

What is now critical is how government fast-tracks the enabling of self-generation and the establishment of a second power generating entity to take place, as current predictions are for loadshedding to remain for at least the next 18 months to two years.