Key takeaways of the Presidency’s proposed “bold, courageous and decisive action” to address South Africa’s energy crisis

President Cyril Ramaphosa’s address to the nation on Monday, 25 July 2022 intended to illuminate imminent solutions to South Africa’s current power crisis. We have set out some of the key takeaways below:  

Renewable energy procurement: 

• The generation capacity under Bid Window 6 of the Renewable Energy Independent Power Producer Procurement Programme (REIPPP Programme) will be doubled from 2600 MW to 5200 MW. Responses to Bid Window 6 are currently scheduled for 11 August 2022. 
• The importance of the timeous commencement of construction of the renewable energy projects selected under Bid Window 5 of the REIPPP Programme has been emphasised to the relevant government departments and a commitment to a pragmatic approach to the local content requirements for the Bid Window 5 projects has been made, with the priority being the building of new capacity as soon as possible.   
• It is intended that proposals for battery storage will be requested in September 2022, followed briefly by proposals for gas power. 
• The opening of further REIPPP Programme Bid Windows, on an expedited basis, has been promised.  

Enabling private investment in generation capacity

• The licensing threshold for embedded generation capacity will be removed entirely, although registration with the regulator and compliance with technical and environmental requirements for grid connection will remain.
• Parliament will be tasked with addressing the legal and regulatory obstacles to new generation capacity by way of special legislation being tabled on an expedited basis. 
• In the interim, Government will waive and/or streamline the regulatory requirements within the existing legislation and reduce regulatory requirements for solar projects in low and medium environmental sensitive areas. Furthermore, Eskom will be permitted to expand power lines and substations without needing to get environmental authorisation in areas of low and medium sensitivity and within the strategic electricity corridors. 
• In a further step to improve the efficiency or processing of approvals for energy projects, a single point of entry for all energy project applications will be established.
• Commercial and residential installations of rooftop solar and the sale of excess energy to Eskom will be incentivised by a pricing structure - to be announced. 
• The finalisation of the Electricity Regulation Amendment Bill will also support private sector investment and allow private generators to compete on an equal footing with state-owned generators. 

Supporting Eskom

• Efforts will be made to remove unnecessary steps in the process behind Eskom’s purchasing of maintenance spares and equipment.  
• Eskom will increase the current allocation of its budget towards critical maintenance. Law enforcement are focusing their energies on addressing the criminal activities that compromise Eskom’s infrastructure. 
• Personnel and engineers with previous Eskom-experience and members of the private sector will be enlisted to provide support.  
• Surplus capacity generated from existing independent power producers and existing private generators, and from neighbouring countries will be purchased by Eskom. 
• Eskom’s debt is under consideration by the Minister of Finance and climate funding provided through the Just Energy Transition Partnership will be invested in the grid and to support the repurposing power stations that have reached the end of their lives.

This Presidential address demonstrates a multifaceted approach to addressing South Africa’s current power crisis. While the practical implementation of these solutions (for example, how will grid stability be improved to accommodate the intake of further energy produced by additional renewable energy projects and private parties) requires further discussion and consideration, the presentation of the President’s energy plan is welcomed by a South African public who have largely been kept in the dark.  

We have a dedicated and skilled Projects and Project Development team and added to this, the ability to call on additional expertise and experience from our global practice. We have been a driving force behind an unprecedented number of successful transactions in the South African energy transition, delivering regulatory expertise, corporate and financing transactional advice, intuitive South African business law acumen and competitive edge to sponsor and lender clients in the Energy sector.  

Our experience in the Energy sector has been gained by advising on all aspects of the development of the industry, its diversity reflecting the changes in the sector through privatisation, new models of regulation and financing, and increasing internationalisation. 

We are market leaders in the South African government’s various energy procurement programmes. Over the various bid submission phases of the South African Renewable Energy Independent Power Producer Procurement Programme (REIPPP Programme), of the 117 bidders selected as Preferred Bidders to date, we have advised on more than half of these projects on a mix of sponsor, lenders and contractor mandates. 

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