DMRE on amended schedule 2 of Electricity Regulation Act 4 of 2006
The Department of Mineral Resources and Energy gazetted the Amended Schedule 2 of the Electricity Regulation Act 4 of 2006 on 12 August 2021, for 100 megawatts of embedded electricity generation as approved by Minister Gwede Mantashe.
The amendment follows President Ramaphosa’s announcement on 10 June 2021 that the Schedule 2 Amendment of the ERA would be published within 60 days. The Amendment serves to increase the threshold for embedded generation from the current 1 megawatt (MW) to 100MW without the need for a license. The intervention to reform the electricity regulation regime has been hailed as a positive way forward by the energy sector and industry across the board. It is envisaged that this step will unlock significant investment in new generation capacity in the short-to-medium term, and make significant inroads towards achieving national energy security, as well as reduce the impact of load shedding across the country.
Under the newly gazetted Amended Schedule 2 of the ERA, applicants for 1 – 100MW embedded electricity generation projects will now be exempt from the obligation to apply for a Licence but, will be required to register with the National Energy Regulator of South Africa (NERSA.)
New legislation requires SA buildings to display energy performance certificate
Recently gazetted regulations published by the Department of Mineral Resources and Energy now make it compulsory for non-residential buildings in South Africa to declare their energy consumption by displaying an energy performance certificate at the entrance of their buildings. Building owners have until December 2022 to comply with these new building energy regulations, which require a formal assessment of your building energy consumption.
According to David Petrie, Technical Manager (Utilities) at FM Solutions Technical, these directives form part of the National Energy Efficiency Strategy under the National Energy Act, 2008 (Act No.34 of 2008), aimed at improving the country’s energy consumption. This process will determine the amount of energy that a specific building is allowed to consume per square metre. Similar energy performance certificate systems are currently in operation in the EU and the UK, where it was launched in 2007.
“It is important to note that the new legislation does not apply to factories and manufacturing plants. It applies to offices and public spaces, i.e. buildings that are used for entertainment and public assembly, theatrical and indoor sports activities as well as places of instruction,” Petrie explains.
These include schools, malls, theatres and places of work that are bigger than 2,000 square metres. Government buildings larger than 1,000 square metres must also comply with the new legislation. Buildings that have been in operation for less than 2 years, or have been subject to a major renovation within the past 2 years are exempted. Moreover, the new regulation stipulates that there are certain areas that can be excluded from the calculations, such as garages, car parks and storage areas.
“An Energy Performance Certificate, similar to those displayed on household appliances, must be issued by an accredited body in accordance with SANS 1544:2014 – Energy Performance Certificates for Buildings. This certificate must rank the energy rating (ER) of a building on a performance scale (A-G). This is to the maximum energy consumption (kWh/m²/a) per building type as per the SANS 10400 XA,” he says.
The certificate must be issued by a SANAS accredited body and be submitted to the South African National Energy Development Institute. The Department of Mineral Resources and Energy will appoint inspectors to audit buildings for certificate compliance and validity. The certificates will be valid for a period of five years
As specialists in energy efficiency and energy management, FM Solutions Technical are regularly called upon by their clients to conduct the energy assessments. Petrie explains that this is not a one-size-fits all approach, as there are various important factors that need to be taken into consideration, including the physical location and the climatic zone of the premises, history of energy usage, size of the building and nature of the business.
“It is important to regularly conduct a detailed energy audit to identify the biggest electricity users. This allows landlords and tenants to consider replacing them with alternatives that would be more efficient and unlock significant savings in the long run. For this reason, we encourage organisations to adopt the new legislation as an opportunity to implement good practices that would benefit their bottom line and improve overall efficiencies,” he concludes.
For more information on how FM Solutions Technical can assist with Regulations for the Mandatory Display and Submission of Energy Performance Certificates for Buildings, visit www.fm-solutions.co.za
Wind power producers may provide immediate surplus power
The South African Wind Energy Association has engaged with its members to ascertain if the sector is able to provide additional power, in line with the recent call for additional energy from existing Independent Power Producers by the Department of Mineral Resources and Energy (DMRE).
The Department of Mineral Resources and Energy (DMRE)’s proposed ‘Additional Megawatt Programme’ will see the Department entering into agreements with existing renewables Independent Power Producers (IPPs) to procure additional energy that wind and solar farms could supply, over and above, what is currently allowed under their existing Power Purchase Agreements.
“We welcome this call from government and can confirm that several of our IPP members have indicated that they will be responding. They are of the view that it is possible to run their wind turbine generators (WTG) at higher power output or include a power boost to increase generation output of already installed wind turbines,” explained Ntombifuthi Ntuli, CEO of SAWEA.
She added that the industry will be seeking clarification on practical details of the ‘Additional Megawatt Programme’, but that the response has been positive overall. When the country reached unprecedented Stage 6 load-shedding in 2019, SAWEA called for the immediate release of available additional capacity from operational wind farms into the national grid, by lifting the Maximum Export Capacity (MEC) on all operating wind farms.
“Earlier this month, the IPP Office issued a call to all operational IPPs with projects in Bid Window 1 to 4, to make available additional capacity from their operational plants, in order to contribute towards closing the power supply capacity gap. It is encouraging to see that industry proposals are being taken seriously by government and are now being implemented,” said Ntuli.
Due to demand exceeding available supply capacity, South Africa has been plagued with power shortages for a long time. This is despite government’s efforts to implement a number of programmes to close the capacity gap, which include the announcement of preferred bidders for the RMIPPPP and issuing of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) Round 5 Request for Proposals (RFP) as well as announcing future procurement plans.
“Eskom’s Electricity Availability Factor has been below recommended levels for a very long time, as demonstrated by the protracted load-shedding that our country has been experiencing for well over a decade now. This indicates an urgent need to procure new generation capacity, both in the long-term and short-term, to bring the available capacity to healthy levels again,” added Ntuli.
Scatec’s winning bid brings SA into the future with progressive renewable energy plan
Renewable energy power producer Scatec has announced the awarding of their bids to supply South Africa with 150 megawatts of dispatchable power through the use of renewable energy. The bid has been awarded as part of the national Risk Mitigation Independent Power Procurement Plan (RMIPPP) by the Department of Mineral Resources and Energy.
It represents government’s response to the current energy crisis, in which power shortfalls have threatened to bring the country’s economy to its knees. Unlike its predecessors, the RMIPPP is a progressive, energy-agnostic scheme and therefore not prescriptive when it comes to power generation technology, but rather focused on technical outputs, driven by power system requirements.
On that basis, Scatec opted to present solar plus battery only bids; going toe-to-toe with fossil fuels and other hybrid configurations. It should be noted that the Scatec bids are the only renewable energy only bids awarded in this tender process – showcasing the company at the forefront of future-oriented power delivery in South Africa and indeed globally. The plan aligns with government’s 2019 Integrated Resource Plan – a living document that articulates South Africa’s envisioned transition to a cleaner, mixed energy supply, with greater emphasis on renewable power.
Jan Fourie, Scatec’s General Manager for Sub-Saharan Africa, states that the project site will house over 2-million individual solar panels, reach roughly 10 kilometers from end to end, and will require a total capital expenditure of around $1-billion. “To our knowledge, this may well be the world’s largest solar and battery storage hybrid plant,” he adds. The initiative will consist of solar arrays totalling 540MWp, all situated at the same site in the sunny Northern Cape.
Each project will be capable of generating 50 megawatts of dispatchable power (or Contracted Capacity, in RMIPPPP terms) and will be co-located with cutting-edge energy storage technology plants using lithium-ion batteries, in aggregate having a capacity of 1.1 gigawatt hours, allowing for an unprecedented level of output control and dispatchability.
The site has been overly capacitated to generate agreed-upon power even in the lowest-performing solar months – with 22 years of hourly historical data being studied to ensure optimal performance. Together, they will meet the requirement to be dispatchable, according to market needs, and be fully dispatchable daily from 5:00 am to 9:30 pm.
“Totalling an impressive output capacity of 150 megawatts of clean, dispatchable power, the projects will play a major role in closing the energy gap in South Africa and mitigating the threat of continued load shedding in coming years. These bids will also contribute large amounts of skilled and unskilled jobs to the South African economy during the construction phase, and generate substantial long-term employment going forward,” says Fourie.
Scatec, who is present on four continents and headquartered in Norway, brings global experience in a diverse range of renewable power generation projects, having been active in the South African market since 2010. From their local offices in Cape Town, the group operates and manages an impressive portfolio of 6 utility-scale solar PV sites and operations, including the Kalkbult plant in the Northern Cape (the first utility-scale solar plant in SA), as well as the recently completed 258 MW Upington Solar Complex.
“We are proud to be the country’s leading supplier of solar power, with an array of plants and projects totalling 448 megawatts of renewable energy.”
Jan Fourie, Scatec’s General Manager for Sub-Saharan Africa
The call for bids has attracted power industry heavyweights who will collectively supply a grand total of 2 gigawatts of electricity by July 2022, in order to reduce the impact of load shedding on the national economy in a timeous manner.
Fourie believes that the bid comes at a crucial time in the energy-landscape where renewables are poised to become more cost-effective than ever before, and in which many global fossil-fuel giants are now pivoting their efforts and resources towards renewables.
Scatec’s bid is based on renewables, innovative battery, and storage technologies alone, and represent an appreciable contribution towards South Africa’s cleaner energy goals – part of a broader global effort to reduce carbon emissions and ameliorate global warming – as outlined in the IRP.
“Our work demonstrates a commitment to a brighter, greener future globally, and stands as an important testament to the fact that renewables are now fully dispatchable and can compete in the market against traditional, less sustainable energy resources,” Fourie says.
The Department of Mineral Resources and Energy (DMRE) recently launched the Request for Proposals (RFP) for the Fifth Bid Window (BW5) under the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), which calls for proposals from Independent Power Producers (IPPs) to develop new generation capacity of 2 600MW, including 1 600MW from onshore wind energy and 1 000MW from solar photovoltaic (solar PV) power plants, in line with the government’s intention to increase generation capacity and ensure the security of energy supply to society. Ahead of the expected DMRE Bidders’ Conference, to be hosted on an e-platform, during May 2021, which will provide more information on the qualifying criteria and bid submission expectations, the South African Wind Energy Association has shared its impression of BW5.
“There are two key aspects of BW5 that are worth unpacking, namely the local content requirements and the bid evaluation weighting, which has now shifted in line with governments standard procurement norms,” said Ntombifuthi Ntuli, CEO of SAWEA.
The BW5 local content threshold has been retained at 40%, in line with previous rounds. The difference in this round is that there is no local content target, only the threshold is prescribed. Furthermore, for the first time, the REIPPPP introduced designated local content, which, over and above the threshold, requires bidders to procure certain specified components locally. Should these components be unavailable, bidders can apply for exemption, which needs to be lodged with the Department of Trade, Industry and Competition (DTIC).
The wind industry had extensive consultation with the IPP Office and dtic prior to the issuing of the BW5 RFP, specifically on local content requirements and what the industry can achieve in the short and medium terms. To achieve a successful localisation programme with incremental local content thresholds, a consistent procurement pipeline should be established. This would be a positive development as it facilitates augmented job creation and skills development as the economy recovers from the Covid-19 pandemic and looks to accelerated economic growth.
“Consecutive bidding rounds will enable local manufacturing facilities to be re-established and the potential expansion of already operating manufacturers, which is very crucial in creating long-term sustainable jobs,” added Ntuli.
SAWEA has, however, cautioned that the stop-start nature of procurement, and the latent bid windows, severely damaged the meaningful momentum, pre-2015, which established new manufacturing capacity within the wind and solar value chains in South Africa. Significant manufacturing capacity was lost in the delay between BW4 and BW5, with many companies being forced to shut down as a result of the delays, unable to carry the cost of overheads indefinitely.
Looking at the recovery of the manufacturing sector and the possibility of re-investment, Ntuli commented, “Whilst we wholeheartedly celebrate the new impetus, one must be mindful that regaining the investor confidence will not be an overnight process. To enable the required quantity and very importantly, quality, of components will require at least two to three years of investment and development. It is therefore crucial that further interruptions or delays are not encountered. A controlled roll-out of procurement will allow all aspects of the value chain, and not only the manufacturing sector, to expand.”
SAWEA confirms that the industry remains confident in its ability to meet local content requirements and reiterates that it has no reservations or concerns that the sector will respond positively. The Association has facilitated conversations between the DMRE, DTIC and the other key sector stakeholders, to align strategically and map the way forward to deliver on increased local content requirements.
“The wind industry has further submitted its vision to practically increase local content in the next few years and remains fully supportive of growing the local manufacturing sector,” explained Ntuli.
The Association is further heartened by the establishment of the South African Renewable Energy Masterplan (SAREM), which is set to contribute immensely to fast-tracking the establishment of local manufacturing capacity. It is intended that this framework will provide a blue-print from which government departments such as the dtic and the DMRE can provide incentives for investment into local manufacturing.
This is once again important for future bid windows and the renewable energy sector’s ability to deliver jobs and investment, in the post-Covid-19 recovery period.
“SAREM represents an opportunity to identify jobs and investment in our sector linked to the country’s resource plan, as well as to clearly outline how job creation and investment might be enhanced if impediments are removed and replaced rather with supportive policy,” added Ntuli.
BID EVALUATION WEIGHTING
A noted change in BW5 is the evaluation weighting, which has changed from a 70:30 weighting to a 90:10 weighting, indicating a distinct emphasis on tariff. Black women ownership in the project company is a new requirement and has a 5% threshold, otherwise, all other economic development requirements as per BW4 have been retained.
In previous rounds, the REIPPPP used a 70:30 (price: economic development), weighting, attaching higher priority to economic development objectives than the typical government structure of 90:10 at the time.
In closing, SAWEA has noted that the DMRE’s statement reveals that given the energy challenges the country is facing, the qualification criteria have been developed to promote the participation of projects that are fully developed and will be able to be constructed and connected to the national grid as soon as twelve months from financial close, but not later than twenty-four months post financial close.
Amid national energy constraints and a mining sector set to contract, the opportunity exists for South Africa’s mining sector to continue exploring cost-saving measures with improved energy efficiency. With mine production in the country has plummeted in April and May due to lockdown restrictions and a near-total industry shutdown, boosted efforts to save energy and costs can improve the sustainability of this sector, which accounts for 8% of the country’s GDP.
Addressing the ways energy is used in the mining sector can lead to huge financial and environmental savings for mine operations and for South Africa’s national grid.
“Looking at the crossroads of mining and energy, and making some simple changes to operations, means that we can achieve a better economic return on our precious mineral and energy resources,” said Bredenkamp.
Although most mines already have initiatives in place, newer technology and energy-saving techniques offer opportunities for improvement so desperately needed as mine productivity strives to recover.
The decision by President Ramaphosa last year to combine the Department of Energy and the Department of Mineral Resources amplifies the critical importance and synergy between these drivers of the economy. The Department of Mineral Resources and Energy (DMRE) has created a platform for the two industries to work together.
Bredenkamp explained that a recent case study by SANEDI on the 12L Tax Incentive showed how much energy efficiency can be gained from changes in mining operations.
“The 12L Tax incentive provides an allowance for businesses to implement energy efficiency savings. The savings allow for a tax deduction of 95c/kWh saved on energy consumption for a consecutive 12-month period,” Bredenkamp said.
Huge savings from simple changes
SANEDI undertook a case study with a large iron ore open-pit mining operation to establish what could be done to improve the mine’s energy efficiency. The study centred on the heavy mine-owned haul trucks, famous for being “gas guzzlers”. The mine’s trucks consumed a combined total of approximately 73 million litres of diesel during the baseline period.
To improve efficiency, the mine increased the amount of material transported by the haul truck fleets in each cycle, resulting in energy savings due to fewer cycles, achieving the same quantum of tonnes moved. The case study used a calibrated simulation model to assess the savings and found that, over two years, the haul trucks yielded a combined fuel savings of 21,685,430 kWh equivalent energy.
Bredenkamp commented that changing the hauled load would be a simple technical challenge to overcome and it can achieve substantial savings.
“The potential for even greater energy savings lies in every mine in South Africa, and a deeper look into how these mines operate holds huge implications for our economy,” Bredenkamp commented