Expedited timeframes for water use licence processing is good news

The South African government’s commitment to fast-track water use licence applications is good news for independent power producers, a law firm says.

In February 2021, President Cyril Ramaphosa tasked the Department of Water and Sanitation with ensuring that water use licence applications are finalised within 90 days. The current 300-day process has created bottlenecks across the economy. Furthermore, it has hampered the roll-out of independent solar and wind energy projects.

“The misalignment between the timing of environmental permit processing and project development has created challenges for independent power producers”, according to a new report by Cliffe Dekker Hofmeyr (CDH).

For companies bidding to supply electricity to the national grid, these timing issues have meant that projects sometimes fail to meet the bidding criteria. The Department of Water and Sanitation’s moratorium on processing water use applications until ‘preferred bidder’ status is awarded has only worsened the problem, CDH says.

Positive steps taken

CDH says that in addition to expediting licensing applications, the department appears ready to recruit additional officials to address its capacity constraints.

“These steps are vital in encouraging infrastructure development, and particularly for ensuring a level of alignment with the timeframes associated with the development of energy projects.”

CDH notes that while water use applications will still not be processed until power producers are awarded preferred bidder status, the expedited timeframe will enhance procurement programmes. This is because pending water use applications will be less likely to affect commercial close, financial close or the implementation of projects.

The fifth round of bids under South Africa’s Renewable Energy Independent Power Procurement Programme (REIPPPP) closed on 16 August 2021.

With this in mind, CDH says that it will be telling whether the department abides by the 90-day limit prescribed by the president.