One of the biggest difficulties the sector faces is securing permits and licences crucial for project commencement. (Waldo Swiegers/Bloomberg via Getty Images)
Despite the private sector’s complaints that the government’s reform agenda has been slow-going, the last couple of years have seen radical changes to the country’s energy market.
Speaking to the Mail & Guardian on the sidelines of the 30th Mining Indaba, Vusi Mpofu — sector lead for mining and chemicals at Nedbank Corporate and Investment Banking (CIB) — called the liberalisation of the market “a revolution”.
Referring to the government’s decision to lift the licensing threshold for companies to produce their own electricity, Mpofu noted: “If you think that 24 months ago, we had a one megawatt cap in terms of independent producers. You fast forward 18 months, two years later, we’re now at 100 megawatts and now uncapped.”
“You think of the Eskom configuration, we’re now moving from generation, distribution, transmission,” Mpofu added.
“We’re breaking up all those companies to bring in greater efficiency and to have a more flexible working model in each of those different facets of the energy space. And all this has happened in the short space of two to three years. It would have been unthinkable, unspeakable, five years ago for us to be saying we are in this particular position.”
Mpofu echoed the sentiment expressed by Ana Hajduka, the chief executive of Africa GreenCo, a renewable energy buyer and trader.
“The policy environment, the projected one, is very comprehensively thought through. There are still some elements of risk … But when it comes to market opening, my goodness, so much has been done,” Hajduka said during a Nedbank CIB-hosted panel on Monday.
“There is the Electricity [Regulation Amendment] Bill. There are all the Necom [national energy crisis committee] working groups. Eskom is working, literally day and night on the new market rules. So nothing has been enacted comprehensively yet. But the process that we are all going through, from our perspective we are very impressed.”
In his address during the Mining Indaba’s opening ceremony, President Cyril Ramaphosa emphasised the government’s efforts to push on with economic reforms, including lifting the licensing threshold — which was the impetus for the establishment of 1312 generation facilities.
About a third of this estimated 6 387 megawatts of capacity supplies the mining industry.
But Mpofu’s acknowledgment of these changes comes with a caveat. “However, we are in a crisis. Once you are in a crisis of this nature, of course you must make these bold decisions,” he said. “And one wonders why they were not made 10 years ago.”
South Africa’s financial sector has a considerable role to play in the liberalised energy market, with renewable energy emerging as an asset class private investors are scrambling to get in on.
In late 2022, Nedbank CIB had funded about R35 billion of the country’s renewable energy independent power producer programme.