Debating the benefits and challenges of SSEG

July 2nd, 2019, Published in Articles: EE Publishers, Articles: Energize, Articles: Vector, Featured: EE Publishers

EE Publishers, in cooperation with Nedbank, recently hosted the second in a series of four “Energy Dialogue” seminars at Nedbank’s Boardman Auditorium in Sandton. The title of this seminar was “Enabling small- and medium-scale distributed embedded generation in South Africa” and was chaired by the bank’s Thabang Chiloane.

Click here to view the presentations made at this seminar

Click here to read the report of the previous seminar

Four speakers addressed the audience, Nomfundi Mosete (Nersa), Dr Clinton Carter-Brown (CSIR), Niveshen Govender (SAPVIA) and Richard Nelson (Power Africa). This was followed by an open question-and-answer (Q&A) session.

Fig. 1: The panel from left: Dr Clinton Carter-Brown, Nomfundi Mosete, Niveshen Govender and Richard Nelson.

What is small-scale embedded generation?

Embedded generation is generation which is installed “behind the meter” but still connected to the grid. Small-scale embedded generation (SSEG) typically comprises a rooftop solar PV installation – though not exclusively – and is installed at the customer’s cost rather than the utility’s. Uncontrolled SSEG sector growth could be a matter of concern for the government as it could undermine the integrated resource planning (IRP) process.

Regulation and control

Uncertainty still exists round the regulations pertaining to SSEG. The current policy and legal framework applicable is that any operation of a generation, transmission or distribution facility shall either be licensed or registered with the National Energy Regulator of South South (Nersa). There are three stages in the process: Registration, licensing and ministerial determination.

SSEG with a capacity below1 MW requires registration but does not need to be part of a ministerial determination. SSEG with a capacity greater than 1 MW but less than 10 MW needs to be licensed but does not need to be part of a ministerial determination. Generation plant with a capacity >10 MW needs to be licenced and be part of a ministerial determination.

Fig. 2: The event drew a large audience.

Although SSEG was not included in the 2010 IRP, it does appear in the draft IRP which is currently under consideration. The minister of energy directed Nersa, in writing, earlier this year to proceed with registering SSEGs to a maximum threshold of 500 MW.

Click here for a gallery of photos from the seminar

Registration

In law, the registration and licensing of SSEG vests with Nersa and not municipalities. Regulation is an administrative activity and Nersa has developed the applicable procedures. Nonetheless, there is still confusion around application for registration (by Nersa) and application for connection (by the electricity distributor).

There are two stages to the registration procedure. Firstly, application must be made to the licensed distributor (LD) for connection of the generation facility and use of the distribution system. This is required by law. Then an application must be made to Nersa for registration or licensing of the generation facility. This requires a letter from the LD confirming that connection permission has been granted.

The application and approval for connection by the LD is being confused with registration. The first stage approves connection to the system, the second approves operation of the generation facility. It is clear that, at present, registration is the responsibility of Nersa. There have been proposals that distributors should take over registration of smaller SSEG on behalf of Nersa, because of the volume involved and it is understood that this is under consideration.

The law requires that even SSEG installations less than 100 kW have to be registered with Nersa. This is likely to change. The current policy and regulatory chaos and uncertainty therefore continues.

SAPVIA’s Niveshen Govender says that although 25% of municipalities have registration procedures, these would actually be procedures for application for connection. The City of Cape Town has a well-developed application procedure which is being confused with registration.

Battery storage

Nersa’s Nomfundi Mosete confirmed that there was no regulatory framework for battery energy storage in South Africa, and battery energy storage was not covered by generation registration or licensing regulations or protocols, because energy storage was not considered as generation, transmission or distribution. However, while this is confusing, this latest indication by the regulator makes sense, in that battery energy storage should not be regulated, registered or licensed as a generator, under current legislation.

Mosete however stated that the position of storage in the network needed further study and consultation with stakeholders, as future usage may require regulation, but that things should not be regulated for the sake of regulation.

Future usage, such as that proposed in other countries, where the utility has access to behind-the-meter (BTM) storage, (in the extreme case the battery in a connected EV), and where the consumer sells stored energy to the utility during peak periods, may require regulation. In cases where BTM storage supplies electricity to the grid, and can possibly affect the operation of the grid, regulation may be necessary.

Multiple SSEG installations

Mosete caused some consternation by stating that embedded generation installations at different sites by a single owner or operator were additive in respect of the need for licencing. For example, if a property owner were to install three embedded solar PV installations of 500 kW each, at three separate properties around South Africa, these installations would have to be licensed rather than registered, because together their capacity would exceed 1 MW. This contradicts what Nersa advised the industry at a workshop on 31 May 2019.

Growth of the sector

In spite of the confusion surrounding registration and licensing of SSEG, the sector is growing exponentially, as indicated by CSIR and PQRS data which was confirmed by discussions with leading equipment suppliers. According to Govender there are about 60 000 SSEG installations in SA totalling some 400 MW. Less than 50 of those, which generate less than 1 MW, have been registered by Nersa and much fewer in the range of 1 to 10 MW have been licensed by Nersa. The problem with existing installations is that there is little information on how many there really are. Information comes mainly from installers which are members of industry associations. There is no knowledge of “grey” installations which could be much more. African Rainbow Energy and Power (AREP) estimates a figure of 700 MW of privately-owned solar PV.

Business opportunities

SSEG represents a massive market opportunity for both South Africa and Africa, according to Carter-Brown, with South Africa being on the verge of a major opportunity. Until recently, renewables were mainly driven by the US, Europe, China and Japan, but this is changing. The opportunities are far bigger than just electricity supply and cross-couple with the EV and SSEG sectors.

Cost reduction is making SSEG more viable, with significant cost reductions materialising the last six to ten years, specifically for solar PV. This is moving the SSEG market from a subsidy-driven sector to a cost-competitive sector. Drivers for SSEG are not just CO2 reductions anymore, but costs and economics, as well as security of supply. Growth is rooted in finance and economics although SSEG does assist with CO2 reduction. Increases in the cost of electricity put pressure on tariffs to end-customers, and customers now have viable options to self-generate.

Future energy mix

The energy mix for South Africa by 2030 will still see coal dominating, but renewable energy will increase. By 2050, the least-cost mix is 70% solar PV and wind, which reflects a fundamental shift. A substantial portion of that could be SSEG. The risk-adjusted scenario with a low energy availability factor (EAF) requires earlier new build including storage. Rapid new build could be partially addressed by SSEG.

Job creation

Technology localisation will increase jobs as local content increases. The biggest increase will be in operation and maintenance (O&M) as the number of installations increases. A CSIR analysis of job creation opportunities for 200 MW/annum SSEG build until 2030 shows construction-phase jobs growing from 2600/year in 2019 to 3500/year and O&M jobs growing from 100/year in 2019 to 1700/year.

Stay on-grid or go off-grid?

The CSIR’s Carter-Brown says that it is unwise to defect or attempt to go off-grid in areas served by the grid as this would be expensive and difficult to operate, with high costs and high maintenance. He suggests that it is better to remain grid-connected and complement the grid supply with renewable energy-based SSEG.

One of the main problems in the SSEG sector is the installation of equipment by unqualified personnel, which results in poor quality and sometimes dangerous installations. This is more prevalent in the residential market. In addition, poor design and misinformation of clients is also prevalent. Complaints received from clients that the system does not deliver promised power levels reveal both under-design and misinformation of clients about the capacity of installed systems.

The law requires that a SSEG installation, as an addition or extension of an existing electrical installation, be issued with a certificate of compliance (CoC) before connection to the distribution network. A CoC can only be issued by a person who is registered with the Department of Labour (DoL). It appears that a lot of small SSEG installations are being undertaken by people who are not registered with the DoL.

Lack of standardisation

The main problem with enforcing or applying standards is the absence of a national standard for PV installations similar to the existing low voltage wiring code, which means that a CoC cannot be issued. The appropriate SABS working group has made progress with the development of an installation standard for embedded generation, to be published as part of the existing family of installation standards (SANS 10142-1-2,“Specific requirements for embedded generation installations connected to the low voltage distribution network in South Africa), a draft of which is due to be released for public comment later this year.

Govender says that good, steady progress is being made regarding technical standards and standardisation, product accreditation, safety standards, training and associated SAQA accreditation, accreditation of designers and installers, documentation of installations, etc, for embedded PV installations up to 10 MW.

Click here to view the presentations made at the seminar

Quality assurance

There is a need for a quality assurance programme for PV. The most promising development is the introduction of the “Green Card” which covers the competence of the designer and installer. Green Card status is awarded to companies after training and proven capability. There are also other quality assurance programmes under development in the industry.

There appears to be no shortage of finance available for SSEG projects either in the form of personal loans or project finance. Although financing is available, single high-value projects are difficult to finance and institutions prefer to finance portfolio or pipeline projects where several projects are involved. Small projects could be financed by direct lending to client, typically by incorporating the SSEG cost into an existing home loan.

The Development Bank of Southern Africa (DBSA) confirmed that it has some US$300-million (about R4,2-billion) available to finance “behind the meter”, distributed, embedded generation in South Africa, pending the finalisation and gazetting of the new IRP 2019 which is currently undergoing consultation at Nedlac. The DBSA funding is intended to finance SSEG in South Africa in the range of 1 to 10 MW.

A new, first-of-its-kind $1-billion World Bank Group (WBG) programme aims to help fast-track investments in battery storage by raising $4-billion more in public and private funds and convening a global think tank with the ultimate goal of financing 17,5 GWh of battery storage by 2025 – more than three times the 4 to 5 GWh currently installed in all developing countries.

Contact Charmaine Manicom, EE Publishers, Tel 011 543-7000, charmaine.manicom@ee.co.za

 

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