Shailin Moodley | Chief Technology Officer | Energy Exchange of Southern Africa (EXSA) | mail me |
While South Africa committed to significantly decarbonise its energy mix by 2030 in 2021, progress started slowly. However, momentum increased at the start of this year. Both President Ramaphosa’s State of the Nation Address and the recent National Budget placed strong emphasis on energy reform.
At the same time, the Department of Electricity and Energy has announced a timeline for wholesale market phasing. This timeline depends on regulatory, commercial and technical enablers. As a result, the race is now on, with stakeholders actively tracking the energy transition. However, significant challenges remain.
These four key signposts will prove crucial in tracking the energy transition and measuring South Africa’s progress toward a diversified, liberalised energy market.
Capacity mix – from coal to a diversified portfolio
The first and most visible signpost is the shift in the generation mix. Progress will not be measured only by new megawatts. Instead, it will depend on how new capacity reshapes the overall supply profile.
The Integrated Resource Plan (IRP) 2025 projects significant new generation capacity by 2030. It places major emphasis on gas, wind, solar and battery storage. The rapid addition of private embedded solar, particularly rooftop PV, already signals progress. In addition, the IRP 2025 reflects an increase in the load factor of gas-to-power plants to 50%.
This indicates a shift in use case from peaking to baseload. Consequently, the broadening of the target energy mix is encouraging and supports tracking the energy transition more effectively.
A major positive indicator is already emerging. New utility-scale solar and wind projects have reached financial close and have begun construction. Similarly, large-scale battery storage projects have started construction. This signals a move toward greater grid stability. Conversely, delays in decommissioning old coal plants without sufficient replacement capacity would raise serious concerns.
Such delays could signal a lack of confidence in the new market. Continued reliance on expensive diesel peaking plants would also indicate weak progress. In addition, the looming threat of the duck or canyon curve and loadshedding requires deliberate solutions. These challenges demand advanced planning and disciplined execution.
Trader participation – from contracts to a competitive market
Traders form the backbone of a liberalised power market. They connect generators to users, create liquidity and manage risk. Therefore, the number of active participants serves as a key indicator of market health.
The number of licensed electricity traders and aggregators could grow steadily. These companies facilitate bilateral PPAs. They will also act as key participants in the future wholesale market. In doing so, they take on the technological and operational burden of participation.
In late November 2025, the National Energy Regulator (NERSA) announced several decisions to accelerate the transition. These include approval of the Market Operator Licence. This enables a shift to a multi-buyer, multi-seller model.
NERSA also finalised the Grid Capacity Allocation Rules (GCAR). These rules support readiness-based allocation and queue management. In addition, it established the Electricity Market Advisory Forum (EMAF). This forum facilitates stakeholder input and expert oversight.
Finally, NERSA issued a notice for public participation on the draft Electricity Trading Rules. The Minister of Electricity and Energy, Dr Kgosientsho Ramokgopa, committed to gazetting these rules by June 2026.
As the sector evolves, it will begin offering more nuanced products. These may include short-term contracts, hedges and derivatives. This development will signal increasing market sophistication. Furthermore, the launch and successful operation of a day-ahead market by the National Transmission Company of South Africa (NTCSA) will mark a critical milestone. However, this step requires extensive preparatory work. This includes wholesale tariff restructuring, trading rules, market code approval, market phasing and vesting arrangement approval.
The President’s 2026 SONA announcement confirmed the intention to unbundle NTCSA from Eskom. Funding announced in the National Budget soon followed. Together, these actions signal strong intent and support transparency and innovation in the private energy market.
The state of the grid – from bottleneck to backbone
The grid represents the biggest technical challenge in South Africa’s transition. Therefore, its expansion rate serves as a critical signpost when tracking the energy transition.
The NTCSA’s Transmission Development Plan (TDP) 2024 sets ambitious targets. It aims to deliver nearly 1,500km of new transmission lines per year. Consequently, consistent announcements of projects reaching financial close and starting construction remain essential.
Despite delays and industry concerns about complexity, the successful implementation of the Independent Transmission Projects Programme would mark a major breakthrough. It would also attract private investment into grid infrastructure. This would signal strong confidence in South Africa’s transition strategy.
Treasury recently announced a new Credit Guarantee Vehicle in partnership with the World Bank. This initiative aims to encourage large-scale investment in transmission infrastructure. In addition, the government plans to launch the first round of independent transmission projects this year. However, delays in environmental and land-use approvals remain a major risk. Infrastructure deployment takes time. Therefore, failure to meet annual TDP targets would create significant bottlenecks.
If this occurs, new renewable capacity may be built in suboptimal locations. Alternatively, it may fail to reach consumers. This would effectively strand billions in potential investment.
Everything hinges on private capital
Ultimately, market liberalisation depends on attracting private capital. It also depends on rebuilding trust in the system and promoting competition. The regulatory environment and government policy remain the primary drivers of investor confidence. While earlier legislation allowed some competitive positioning, recent developments strengthen the framework.
The 2024 Electricity Regulation Amendment Act provides a critical tailwind. It reinforces the legal foundation for a competitive market. In addition, clarity on wheeling tariffs and transparent grid access processes from NERSA remains essential.
South Africa can also leverage the Just Energy Transition Partnership. This international collaboration involves several developed markets. It aims to support the energy transition through initial clean energy funding projects.
Although legislative progress has been positive, risks remain. Any reversal of policy or political resistance would negatively affect capital flows. For example, another pause on private licensing or a poorly executed market launch would create uncertainty.
A lack of transparency in procurement processes would also deter investors. This pattern has emerged in other countries. Furthermore, weak municipal performance in the distribution sector creates additional challenges. It undermines confidence in municipalities as reliable offtakers and slows new generation development.
In conclusion
The transition to a liberalised energy market is not a sprint. Instead, it is a marathon that requires sustained coordination and execution.
South Africa’s energy landscape is set for significant change in the coming years. Trader participation, investor sentiment, grid capacity and energy mix diversification provide key performance indicators.
Together, these factors enable stakeholders to continue tracking the energy transition. They also support progress toward a secure, reliable, and sustainable energy future. Let’s get after it.
