NERSA’s regulations regarding small scale renewable energy embedded generation

March 5th, 2015, Published in Articles: Energize, Featured: Energize


NERSA has issued a discussion document on small scale renewable embedded generation (SSREG) [1] for discussion on a possible regulatory framework for this sector of the market. This article summarises the main features of the document.

The discussion document (DD) is primarily targeted at rooftop solar, a growing sector of the market, ranging from small domestic systems to large factory or warehouse roof systems. The document acknowledges that this sector of the market was not anticipated or catered for in any legislation, including the new generation regulations [2], and that it has therefore become necessary to introduce regulatory control to manage the burgeoning network.

There has been a large increase in the number of private rooftop PV systems installed on residential and commercial/industrial premises at the cost of the owners. Primarily aimed at generating electricity for own use, these systems are nonetheless grid tied, and are capable of feeding surplus power back into the grid. A number of residential rooftop grid tied PV systems using net-metering by agreement with the relevant municipalities have also come to light. Several municipalities have drawn up procedures for connecting such systems, and NERSA has also produced documents covering such situations. So it would seem that in spite of exclusion from the large scale renewable energy independent power producers programme (REIPPPP), privately installed small scale grid tied rooftop solar is alive and well and growing in South Africa.

At the time of writing there were an estimated 253 known projects with a capacity of around 27 MW [3]. This includes commercial/ industrial properties, and residential installations. There are also an unknown number of unregistered installations, and a large number of off-grid installations.

The objective of the DD as stated is to formulate the position of NERSA on qualifying principles, technical and economic conditions for the installation of small-scale renewable embedded generators (SSREGs). The DD covers the following areas:

  • Current legislation
  • Technical and safety requirements
  • Licensing requirements
  • Tariff design and principles
  • Tariff options for SSREGs

Background information

The DD contains an extensive discussion on the impact of SSREGs on the network and possible metering and tariff design and principles and tariff options. This summary does not cover these sections but only the proposals pertaining to legislative requirements, technical requirements and billing systems.

Proposals contained in the DD

Legislative compliance

The electricity regulation act (Act No. 4 of 2006), states that no person may, without a licence issued by NERSA in accordance with the act:

  • Operate any generation, transmission or distribution facility
  • Import or export any electricity
  • Be involved in trading of electricity

Activities listed in schedule 2 of the Act are excluded, namely:

  • Any generation plant constructed and operated for demonstration purposes only and not connected to an interconnected power supply
  • Any generation plant constructed and operated for own use
  • Non-grid connected supply of electricity except for commercial use

The prime purpose of SSREGs is to generate electricity for own use, but where connected to the grid, supply of electricity can occur unless prevented by the system, a situation not contemplated in the act, or the regulations.

The opinion stated in the DD is that SSREGs will be connected to the grid and will be operated for commercial purposes since they will “sell” to the municipalities or Eskom, and they would therefore need to be licenced or registered as per the Act. This is considered to be a fairly liberal interpretation to circumvent the fact that neither the Act nor the associated regulations anticipated or made provision for this segment of the market. In addition the regulations state that only the minister of energy can issue a determination of new generation capacity, and no such determination regarding privately owned SSREGs has been forthcoming. We have then the situation that SSREGs are considered to be generators which need to be licenced but are not considered to be “new generation capacity”. The implications of this will become apparent in the following sections.

The DD therefore seeks to regulate this situation, which is not covered by the Act but is in fact happening by agreement between customers and distributers. According to the DD, NERSA has agreed to licence grid connected SSREGs which supply electricity to the grid subject to certain conditions.

The DD acknowledges that the process of applying for a licence and processing is complex, time consuming and costly, and would place a burden on small installations. In addition the high volumes of solar rooftop installations will put constraints on the regulator, and therefore registration of these plants by distributers, in accordance with the requirements of NERSA’s “Standard conditions for embedded generation within municipal boundaries” document may be a viable alternative to licencing. In terms of this registration procedure the distributors must register and maintain a database of all SSREGs within their area. The conditions for registration are detailed in the DD.

Technical and sizing requirements

The whole set of proposed regulations around technical and sizing requirements seems to be aimed at limiting the system to a net-consumer configuration, which will comply with the legislative limits discussed earlier (i.e. exclude the system from being regarded as “new generation” capacity).

The renewable energy grid code (REGC) [4], forms the basis for technical requirements for potential SSREGs. All embedded generators shall demonstrate compliance with all applicable requirements specified in the REGC for category A1 generators and any other applicable code or standard approved by NERSA, as applicable, before being allowed to connect to the distribution system and operate commercially.

The following mature and commercially available SSREG technologies based on 100% renewable energy shall qualify:

  • Solar rooftop PV
  • Wind
  • Biomass
  • Landfill gas
  • Biogas
  • Small-hydro

However, the technical requirements for small wind, landfill gas, biogas and small hydro would differ. “Commercially available” means that the major energy system components are acquired through conventional procurement channels, installed and operational at a project site.

SSEGs shall meet the following requirements to qualify for licensing:

  • The generator must be connected to the distribution network of the utility or municipality.
  • Rated power must be less than 1 MVA (Power rating of category A in REGC) and less than the installed capacity (rating) of the customer. This is an important requirement which excludes systems intended primarily to supply power to the grid, and to ensure adequate protection under reverse-feed conditions.

The above requirements are further divided into three sub-categories:

  • Category A1 (0 – 13,8 kVA): This sub-category includes rooftop PV generators with rated power in the range of 0 to 13,8 kVA, and is aimed at the standard domestic connection of 60 A at 230 V.
  • Category A2 (13,8 kVA – 100 kVA): This sub-category includes rooftop PV generators of Category A with rated power in the range greater than 13,8 kVA but less than 100 kVA.
  • Category A3 (100 kVA – 1 MVA): This sub-category includes generators of Category A with rated power in the range 100 kVA but less than 1 MVA.

SSREGs must meet REGC requirements of categories A1, A2 and A3, with regard to connection and operation, as detailed in the DD. The conditions for grid connection of SSEGs is prescribed by NRS 097-2-1:2010 and NRS 097-2-3:2014.

The SSREG must be sized so that the amount of electricity produced by the system primarily offsets part of the host customer’s rated capacity at the project site, and is not greater than the rated capacity of the installation or 1MW, whichever is the smaller. Systems designed to completely off-set the energy demand of the customer will not be allowed; the customer must still remain a net importer over a 12-month billing period. SSREGs will be allowed to be net exporters in any month, but not over a 12-month billing cycle.

Billing and energy accounting agreement

Customers proposing an embedded generator connection are required to enter into a connection and operation contract or power purchase agreement (PPA) with the electricity distributor. The distributor will be required to accept electricity from the SSREG when available subject to network constraints.

The document includes a long discussion on various options which could be used for billing and accounting, but finally decides on a system of net metering.

Net energy metering proposal

Net energy metering (NEM) of kWh instead of rand shall be used. NEM will allow the customer to size generation to meet a portion of the annual energy demand. Since energy demand also varies at any given moment it is very difficult to determine if a SSREG system will be serving onsite load or exporting energy to the grid. NEM means that energy demand and self- generation do not have to be precisely coincident to return value to the customer.

Each month, electricity which the SSREG produces in excess of own consumption will be supplied to the grid and credited to its account for up one yearly billing cycle, after which any remaining credit is forfeited to the distributor and a new 12-month billing period with a zero balance begins. This reduces any incentive for the customer to oversize generation with respect to load.

The energy credits received for surplus electricity supplied to the grid will be used to offset all or part of the energy consumed each month. The DD proposes that domestic energy accounts will be billed annually for “net” energy consumed over the previous twelve months. This is considered to be an unworkable situation as non-residential accounts will be billed monthly for their energy usage, and a uniform billing system should be adopted. Residential customers should also be informed on a monthly basis what the status of their account is, to avoid large payments at year end. The energy credits accrued will be applied only to energy consumed.

If in a given month the customer “net consumed” energy, there will be energy usage charges for that month (customer pays the utility money). If the customer “net generated” energy, the customer gets energy credit for the month (customer does not pay any money to the utility for energy usage).

The PPA shall not be less than one year across all seasons to ensure that electricity generated in summer will be fully remunerated (e.g. high summer production balanced off by the lower production in winter).

The PPA shall not be for longer than three years for municipal distributors because they are not allowed to make financial commitments longer than that without the approval from National Treasury and other stakeholders [this is a legislated position (MFMA section 33)].

Excess credits of kWh shall not be transferred to another account.


[1] NERSA: “Discussion document : Small-scale renewable embedded generation: regulatory framework for distributors”,

[2] DoE: “Regulations on new generation capacity”,

[3] C Ballack: “Demand for solar PV in SA”,

[4] NERSA: “Renewable energy grid code”,

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