Understanding interconnection rule non-compliance: Lessons from South Africa's surge in unauthorised distributed energy resources

Abstract

The integration of distributed energy resources (DERs) such as rooftop solar and battery storage into electricity grids poses a regulatory challenge for utilities globally. While interconnection rules are designed to ensure the technical integrity and financial sustainability of power systems, stringent policies and punitive pricing signals have inadvertently led to the proliferation of unauthorised DERs in many parts of the world. Unauthorised DERs pose a range of technical, financial and safety risks to the power system, yet the drivers of non-compliance remains undocumented in the literature. This paper explores the drivers of non-compliance in South Africa, where by 2024 >50 % of behind-the-meter solar capacity is illegally connected to the grid. By quantifying the misalignment of private and public DER value streams, this study identifies key barriers to compliance, including high interconnection costs, lengthy approval processes, and misaligned pricing signals. A comparative case study between three South African municipalities illustrates how different utility governance approaches impact the business case for DER investment. A simple but important finding is that utility approaches can significantly impact a customer's decision to follow the formal interconnection process. A revenue impact modelling exercise revealed the detrimental impacts of unauthorised DERs on utility revenue. These results suggest that, in jurisdictions facing unauthorised DERs, early financial incentives are essential to minimise non-compliant installations and the associated utility revenue erosion. As DER penetration expands into new global regions, these findings are expected to assist utilities and regulators in developing appropriate regulatory frameworks that facilitate the sustainable integration of DERs.