Mining firms welcome own-power plan, but ‘will wait for details’

The announcement by Mineral Resources and Energy Minister Gwede Mantashe that mining companies will be allowed to generate their own electricity has resonated with many seeking a viable alternative to Eskom’s erratic power supply.

Mining experts and politicians said the minister’s statement “made sense” and called it “good news” and “encouraging”.

Mantashe delivered the keynote address of this year’s Investing in African Mining Indaba in Cape Town and his statement was expected to be a point of reference at the indaba and in future discussions on energy.

Mining regulation specialists and partners at Webber Wentzel, Jonathan Veeran and Manus Booysen, said they were encouraged by Mantashe’s comments on self-generation of electricity but would wait for the details.

“In an environment of weak commodities prices and slow growth, mining companies may find it difficult to fund self-generation projects. It will not be easy, unless it is large and long-term, to put up an economically sustainable energy generation facility,” the experts said.

“It is also positive that the minister anticipates competition in the electricity industry which will have a positive effect on prices.

“But these are long-term plans, while the problems facing Eskom are immediate. We are disappointed he said nothing about the immediate way forward and action being taken with Eskom,” the experts said.

Jason van der Poel, specialist in power and energy at the Sandton-based law firm, said the current Integrated Resource Plan unveiled by Mantashe last year did not cap the amount of distributed generation produced up to 2022. But the plan capped it at 500MW per year from 2023 to 2030.

According to Van der Poel, Mantashe told the indaba that his department and the National Energy Regulator of South Africa (Nersa), is in a process to gazette a revised schedule 2 of the Electricity Regulation Act to enable self-generation and facilitate municipal generation options.

“We are encouraged by the minister’s comments, but we await details,” Van der Poel said.

“A key issue will be generally how fast government can move to harness generation capacity that is ready to be engaged and whether the minister will use his powers under the Electricity Regulation Act to expedite approvals that may be needed by generators that can provide electricity quickly,” Van der Poel said.

The Freedom Front Plus said Mantashe’s announcement was good news, but critised his suggestion that a new enterprise focusing on generation of power must be established.

Spokesperson on energy Wynand Boshoff said his party for years argued for consumer producers of electricity as the “best solution” to the growing problem of power shortages.

“It will enable households to not only generate their own power, but also to earn an income from the surplus. In this way thousands of roleplayers can contribute to the power grid,” said Boshoff.

The Webber Wentzel analysts said it was a positive that Mantashe was honest in his opening address in which he contrasted global growth of 3.3% in 2020 and 3.4% in 2021 with SA’s GDP growth of below 1%.

“He immediately referred to the problems resulting from power outages and that mining production fell by 3.1% year-on-year in November 2019. His opening did not paint a rosy picture and acknowledged electricity constraints,” they said.

On policy and regulation, Mantashe acknowledged the need to attract investment and said government is committed to work with the sector.

The experts welcomed this plan to introduce legislation on oil and gas but “we are concerned the new legislation is not congruent with the previous draft agreed with the industry”.

– ericn@citizen.co.za

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