Generation of electricity – The ‘current’ state of events

12 May 2022 ,  Candice ReyndersJohnny Davis 1063
The concept of renewable energy in South Africa has become a significant topic of conversation in recent years. Not only is South Africa rich in minerals, but its wide-open spaces, favourable climate and thousands of kilometres of coastline make it a prime location for the generation of renewable energy. Resultantly, international investors have identified South Africa as a potential renewable energy generating hub, with South Africans also waking up to the opportunities that may accompany the renewable energy sector.

But what is renewable energy and how is the generation thereof regulated? 

Renewable energy is broadly considered to be the harnessing of naturally occurring non-depletable sources of energy, including solar, wind, biomass, biological waste, hydro, tidal, wave, ocean current and geothermal, to produce electricity, gaseous and liquid fuels, heat or a combination of these energy types. When one considers the scope of this definition it is instantly apparent how wide the scope of renewable energy projects is. 

A popular area of focus at the moment is the generation of electricity through the use of renewable energy sources and in this article, we will accordingly take a look at this area the main rules and regulations that apply to it.

The generation of electricity from renewable sources falls under the jurisdiction of the National Energy Regulator of South Africa (“NERSA”), which was established under the National Energy Regulator Act, 40 of 2004 (“NRA”). The NRA, together with the Electricity Regulation Act, 4 of 2006 (“ERA”), establishes the framework for renewable energy generation in South Africa. Such legislation, together with accompanying regulations, notices, rules and guidelines, grants expansive regulatory power to persons desirous to generate electricity. Furthermore, the provisions of ERA apply regardless of the manner in which the electricity is generated, being either through the use of solar, wind, biomass, biological waste, hydro, tidal, wave, ocean current, geothermal or any combination of these renewable energy sources.

Very importantly - in terms of ERA, no person may operate any generation, transmission or distribution, facility; import or export any electricity or trade with electricity without a licence issued by NERSA. The licence application is subject to a prescribed process before the licence can be issued, which processes could be a stumbling block to entry in this sector. Additionally, the licence may be subject to further conditions of NERSA, including the imposition of tariffs guiding principles. Failure to abide by these conditions and/or the provisions of the ERA, may find the defaulting licensee liable for a penalty up to 10% of the annual turnover of the licensee or R2 million (whichever is the higher amount) per day until the breach is rectified. 

Despite these tough provisions, ERA does provide for instances where persons or certain activities carried out by such persons are exempted from obtaining a licence. In these cases, the distributors may generate electricity without a licence provided that they meet certain requirements and their generation does not exceed a prescribed capacity threshold. However, some of these exempted distributors may still need to be registered with NERSA and comply with prescribed codes of conduct and practice. Such exemptions are therefore not a free ticket to generate electricity, and any person wishing to operate in the sector would need to understand the ambit of the exemption to avoid any contravention of ERA. 

From this cursory examination, it should be clear that despite the opportunities, any renewable energy project used to generate electricity will need to adhere to specific compliance rules for the generation, transmission and distribution of electricity. If you are interested in entering this sector or already involved therein, avoid getting the ‘shock’ of your life by contacting our renewable energy team and let’s sit down and see how we can help you get your renewable energy project safely and legally off the ground!



Disclaimer: This article is the personal opinion/view of the author(s) and is not necessarily that of the firm. The content is provided for information only and should not be seen as an exact or complete exposition of the law. Accordingly, no reliance should be placed on the content for any reason whatsoever and no action should be taken on the basis thereof unless its application and accuracy has been confirmed by a legal advisor. The firm and author(s) cannot be held liable for any prejudice or damage resulting from action taken on the basis of this content without further written confirmation by the author(s). 

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Related Sectors: Renewable Energy
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