South Africa: Renewable Energy Regulation And Policy In South Africa

Last Updated: 5 December 2010
Article by Happy Masondo

The National Energy Regulator of South Africa ("the NERSA") is a statutory entity established in terms of Section 3 of the National Energy Regulator Act 40 of 2004 whose functions include, but are not limited to:

  • intensifying the necessary steps to diversify South Africa's energy sources;
  • increasing power capacity; and
  • reducing carbon emissions in South Africa.

To this end the NERSA has declared that in approving Eskom's 24.8% tariff increase during March 2010, it has designated specific amounts for investment in renewable-energy sources (i.e. naturally occurring non-depletable sources of energy) to produce electricity, gaseous and liquid fuels, heat or a combination of these. The designated amounts are: R2.3 billion for 2010/2011; R4.3 billion 2011/2012 and R5,8 billion for 2012/2013.

The NERSA has also published its Renewable Energy Feed–in Tariffs1 ("REFITs"), which are the prices guaranteed to the producers of renewable energy as a mechanism to promote its deployment in South Africa.

It also appears poised to implement the necessary regulatory and legal frameworks established under REFIT.2 Key amongst these is the current draft of the Power Purchase Agreement ("PPA")3 to be concluded by Independent Power Producers ("IPPs") and the Renewable Energy Purchasing Agency ("REPA"). The PPA contemplates that IPPs will sell the electricity they generate to the REPA at the stipulated rates under REFIT. The Regulator has sought to incentivise IPPs generating renewable energy by ensuring that there is:

  • guaranteed access to the national electricity grid;
  • set and certain rates payable to the IPPs; and
  • the term of the PPA is for a certain period, currently 20 years.

These incentives are imperative for potential investors to find the renewable energy sector as investor friendly as possible. In addition, investors would want the assurance that the cost of renewable energy is competitive with conventional energy.

Single buyer model

While the South African legal and regulatory landscape appears geared for advancing the renewable energy sector, there may well be inadvertent disincentives as well. In terms of the PPA, the REPA is currently established under Eskom as the single buyer office ("SBO") of the energy generated by renewable energy IPPs.

Historically the single buyer model has proved to be popular in developing countries seeking to encourage IPPs to generate energy and sell it to the national utility. In terms of the Eskom SBO model, the SBO will purchase the energy produced by the IPPs from renewable sources of energy and will sell it on to Eskom customers. In the current draft of the PPA4 , the volume of the energy generated and sold to the REPA shall not exceed the contracted capacity. While the phrase "contracted capacity" is used as a defined term, it is not defined in the PPA.

Notwithstanding the absence of the definition there is a clear intention on the part of the Regulator to limit the volumes of the electricity to be purchased by the SBO from the renewable energy IPPs. In a market, or willing-buyer-willing-seller model, the IPPs would be in a position to sell their net capacity not contracted for by the SBO to any willing buyer. In clause 6(2) of the current draft of the PPA, IPPs are precluded from selling their excess energy to any other buyers except with the prior written consent of the SBO.

It is also difficult to see how the SBO can promote and facilitate competition in the renewable energy sector when Eskom itself is proactively seeking to generate electricity from renewable energy sources itself. The adoption of the single buyer model appears to be yet another attempt by the national utility to hold onto its position as a monopoly in the electricity sector.

A tendency to hold on to and perpetuate monopolistic elements would serve as a disincentive for some of the potential investors in renewable energy technologies. With so much else stacked against the rapid development and advancement of the renewable energy technologies, the Regulator should be on guard against inadvertent disincentives.

Striking the energy balance

Approximately eighty five percent (85%) of Eskom's power plants are coal fired and the rest are nuclear, open-gas turbines or hydro-power plants. Many of these plants (about a quarter) are at least 50 years old and will need to be replaced between 2021 and 2028. It could be argued that the state of Eskom's current infrastructure offers an opportunity for renewable energy technology to replace all the coal-fired power stations.

However, it will not and cannot happen. South Africa's large coal reserves and its failure to make investments in renewable energy technologies several years ago mean that both development and advancement of renewable energy technologies will always lag behind coal-fired technology. The two types of energy sources are generations apart. If the renewable energy technologies were put into the race, they would be set to fail from the outset.

Given the lack of advancement of the renewable energy technology, an uncomfortable balance has to be struck between the coal-fired energy traditionally relied on by the South African power utility and alternative renewable energy sources and technologies.

Earlier this year, the World Bank approved a loan of US$3.75 billion ("the World Bank loan") to Eskom for the construction of one of the world's largest coal-fired power plants, the Medupi power station ("Medupi"), in Lephalale, in the Limpopo Province.

Currently, in South Africa, renewable energy technology is not sufficiently advanced to produce the 4800MW of electricity to be generated at Medupi when it is eventually commissioned in 2013. Fundamentally, as a country we simply have to keep the lights on, yet it will be a while still before we can do so solely through the supply of cleaner renewable energy.

However, the Medupi will, for the first time on the African continent, be using super-critical technology in the form of cleaner coal in six 800MW boilers. This will improve the efficiency of the power plant because super-critical technology boilers operate at higher pressure than traditional coal-fired power plants, which reduces fuel consumption and carbon emissions.

US$260 million of the World Bank loan will be for piloting a 100MW wind power project in Sere, Vredendal and a 100MW concentrated solar power project with storage in Upington, Northern Cape. An additional, US$485 million is allocated to low-carbon energy efficiency components, including a railway to transport coal with fewer greenhouse gas emissions.

These apparent contradictions have to be accepted for what they are, an uncomfortable balance between the coal-fired energy traditionally relied on by Eskom and the alternative cleaner renewable energy sources in an effort to minimise the potential for the repeat of the energy shortage experienced in 2007/2008 with its attendant severe economic consequences.

Nevertheless, no sooner had Eskom obtained the World Bank loan for the completion of Medupi, it was scouring the market for funding for yet another 4800 MW coal-fired power station, the Kusile power station ("Kusile") in the Mpumalanga Province.

With all this focus on the construction of new coal-fired power stations we would be excused for believing that South Africa, the Regulator and Eskom have no interest in shoring up support for the development of renewable energy technologies. Cynics cannot help but wonder how far along the environmentally-friendly technologies would be if they were receiving equal or more funding than the traditional coal-fired super-critical technologies are currently receiving.


There is limited scope to allow or encourage rapid development and expansion of renewable energy sources and technologies. This is against the backdrop of intensive remediation of moth-balled coal-fired power stations; replacement of more than half of the old coal-fired power stations; and construction of new coal-fired power stations.

The logical approach would be to replace the old/moth-balled coal-fired technologies with renewable energy power stations within a legal and regulatory framework open to rapid development and advancement of renewable energy technologies. However, the sad reality is that the renewable energy technologies are too far behind to catch up and Eskom has to keep the lights on.


1. See the Guidelines, GN382 OF 17 April 2009 to the National Energy Regulator Act 40 of 2004 for FERIT I and the NERSA Consultation Paper, July 2009 for REFIT II.

2. Ibid

3. See the NERSA REFIT PPA on the NERSA website

4. See definition of "Commercial Energy", under the definitions and interpretation of NERSA REFIT PPA, p4

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Routledge Modise
Werksmans Incorporated
Werksmans Incorporated
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Routledge Modise
Werksmans Incorporated
Werksmans Incorporated
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions