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Miners call for urgent deregulation of the energy sector

January 31, 2022
Miners call for urgent deregulation of the energy sector

The mining industry has called for urgent deregulation of the energy sector so that private players can help to relieve crippling energy shortages facing South Africa.

Speaking during a webinar about decarbonising the mining sector, hosted by Creamer Media and the Minerals Council, various industry players on Friday highlighted the pressing need for red tape to be cut – and swiftly.

The calls for deregulation come almost eight months after government lifted the private generation licensing cap from 1 MW to 100 MW, a reform which has praised as being amongst the most meaningful structural reform implemented the ANC.

Even so, other major hurdles remain.

For companies like Gold Fields, which is developing at 40MW solar project at its South Deep mine in Johannesburg, renewable projects make good economic and financial sense. "That is not holding us back. The challenge is further deregulation, so that we can go beyond the 100 MW cap that we've currently got," said Martin Preece, executive vice president for Gold Fields in South Africa.

Nikisi Lesufi, the Minerals Council’s senior executive for environment, health and legacies, said there was still a "plethora of red tape" which is stopping individual mining companies from fast-tracking power and renders the uptake of independent power being far slower than anticipated.

A piecemeal approach to deregulation won’t cut it either.

"We need some more, deeper structural forms," said Jevon Martin – Head of Energy and Decarbonisation at Sibanye-Stillwater and chairperson of the Energy Intensive Users Group (EIUG). "That could include the likes of the unbundling of Eskom –  which is happening – the establishment of the independent transmission system market operator and then opening the country up to trade [energy]."

A great deal of hesitancy relates to the fact that private power projects must hinge on the life of a mine, and companies worry about the risk of stranded assets. "But if you introduced the ability to trade, you then are able to potentially sell excess power later to smaller companies that wouldn't necessarily have pursued a standalone utility scale project by themselves," Martin said.

Preece agreed: "I'm sure some of the bigger mining houses would want to find ways to deal [power] between operations, and I think we need to find ways to unlock that so we can potentially play a bigger role than just looking after ourselves." 

Despite the hurdles, the private sector is pressing on with green projects – although at a slower pace than it would like. Already, the Minerals Council estimates the mining industry has 3 900 MW of renewable energy projects worth an estimated R60 billion in the pipeline.

"Despite the regulatory barriers … there is overriding need for it [independent power]. So companies are pushing through this. It is taking time, and that's potentially why are seeing slow progress," said Martin. "But I think in the course of this year, we're going to see an explosion of announcements around private power generation. In a short time thereafter I'm sure storage is going to feature very strongly the in the announcements as well."

The lack of affordable energy storage options for renewable power has for long been highlighted as a key barrier in the adoption of green power en masse.

While the price of battery storage is coming down, it is not a prominent feature in domestic renewable projects as yet.

"I think storage is a rapidly emerging solution," said Preece. "When we did the initial numbers, a year ago, storage was still questionable but I think that's moved along very quickly, and we actively looking at storage." 

The speakers further highlighted the urgent need for collaboration. 

"We have to recognise this is not a competition and we need partnerships – with communities, unions, investors, regulators –  that put South Africa first," said Abel Sakhau, Environment and Climate Change Manager at Exxaro Resources. "That will allow us to have difficult conversations about the future of the country, it will also allow us to make sure that no one is left behind … this is not a race to see who's going to get to carbon neutrality first, this is a carbon neutrality project for South African Inc."

Preece said collaboration in this area will require huge amounts of trust. "The government must unlock the regulations, technology providers provide solutions, and the implementers must implement, but I believe it's 100% possible."-fin24

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Last modified on Monday, 31 January 2022 15:38
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