NERSA: Section 34 Determination Concurrence 2021 Approves 11,813 MW

• On January 12, 2021, the National Energy Regulator of South Africa (NERSA) granted concurrence to a Ministerial Determination.
• This determination authorizes the procurement of 11,813 megawatts of new generation capacity for South Africa.
• The capacity includes 2,000 MW from gas, 1,500 MW from coal, 6,800 MW from renewables, 500 MW from battery storage, and 1,000 MW from existing generation.
• NERSA's decision, made under Section 34 of the Electricity Regulation Act, aims to enhance energy security and diversify the national energy mix.
• The concurrence was granted with conditions, emphasizing transparent procurement and thorough grid integration studies for new projects.

The NERSA procurement decision marks a critical juncture for the South African energy sector, unlocking substantial investment opportunities for developers, financiers, and technology providers.

The National Energy Regulator of South Africa (NERSA) announced its pivotal decision on January 12, 2021, granting concurrence to a Ministerial Determination for the procurement of new generation capacity. This crucial NERSA procurement decision paves the way for the addition of 11,813 megawatts (MW) to the national grid, a significant step towards addressing South Africa's persistent energy challenges. The determination outlines a diverse energy mix, allocating specific capacities across various technologies to ensure a balanced and resilient power supply.

Under the approved framework, the determination earmarks 2,000 MW for gas-fired power, 1,500 MW for new coal-fired generation, and a substantial 6,800 MW from renewable energy sources, specifically wind and solar photovoltaic (PV). Additionally, 500 MW is designated for battery storage solutions to enhance grid stability, and 1,000 MW is allocated for existing generation capacity, such as co-generation projects. This comprehensive plan reflects a strategic effort to diversify the country's energy portfolio and integrate cleaner technologies while maintaining a base load.

The NERSA Section 34 Determination concurrence 2021 stems from the legal authority vested in the Minister of Electricity and Energy, who issues such determinations under Section 34 of the Electricity Regulation Act, 2006. NERSA's role, as the independent regulator, is to review these determinations to ensure they align with the country's energy policy objectives, including the Integrated Resource Plan (IRP 2025), and promote the interests of electricity consumers and the broader economy. The regulator's decision to concur signifies its assessment that the proposed capacity additions are necessary and appropriate for South Africa's energy future.

In its deliberation, NERSA considered various factors, ultimately concluding that the Ministerial Determination new generation capacity was essential for enhancing energy security and promoting economic growth. The regulator's concurrence, however, was not without conditions. NERSA stipulated that all subsequent procurement processes must adhere to principles of transparency and competitive bidding to ensure cost-effectiveness. Furthermore, it emphasized the necessity of thorough grid integration studies for all renewable energy projects to maintain grid stability and reliability, underscoring the complex interplay of technical and regulatory requirements in South Africa energy regulation.

The NERSA procurement decision marks a critical juncture for the South African energy sector, unlocking substantial investment opportunities for developers, financiers, and technology providers. The approval of this Ministerial Determination new generation capacity signals a clear path forward for the development of new power projects across a spectrum of technologies. Lawyers advising clients in the energy, infrastructure, and project finance sectors should meticulously review the approved framework to understand the regulatory landscape and potential implications for investment, development, and compliance within the power sector.

This regulatory certainty is expected to stimulate economic activity, create employment opportunities, and contribute to the country's long-term energy sustainability goals. The emphasis on a diversified energy mix, including significant renewable energy capacity, aligns with global trends towards decarbonisation while also addressing immediate supply deficits. Stakeholders must now prepare for the upcoming procurement rounds, ensuring their proposals meet the stringent technical, financial, and regulatory requirements set forth by NERSA and the Department of Mineral and Petroleum Resources and the Department of Electricity and Energy.

This NERSA decision on the Ministerial Determination for new generation capacity procurement provides crucial insight into the regulatory landscape for energy projects in South Africa. Lawyers advising clients in the energy, infrastructure, or project finance sectors should review this document to understand the approved framework and potential implications for investment, development, and compliance within the power sector.

Source: Original reporting via NERSA's January 2021 media statement