By Jason van der Poel, Partner at Webber Wentzel & Rob Futter, Director at Cresco Group
Is what happened to Blue Nova reflective of South Africa's BESS market?
Rob Futter, Director at Cresco Group, points to Reunert's financial results of 26 May 2025, which noted the “disposal of battery storage business Blue Nova Energy as having a significant adverse impact on its interim results.”
In Cresco's view, Reunert's sale of Blue Nova at a loss because of its continued negative performance may be indicative of sentiment in the residential market with the decline in the sale of batteries driven by the lack of load shedding. However, for many larger corporates looking at BESS solutions for security of supply and even large-scale utility projects looking to “provide” peak shifting energy, BESS is a key technology opportunity being considered.
Stakeholders across the energy sector are now developing BESS strategies aimed at unlocking long-term value for them. While security of supply remains important, it is no longer the only driver of BESS value with standalone solutions now becoming economically viable due to decreasing battery costs.
BESS value is poised to be unlocked as the South African grid continues to add renewable energy generation while awaiting the introduction of a liberalised energy market.
BESS Round 3 preferred bidders announced
Jason van der Poel, partner, and Kiera Bracher, associate, at Webber Wentzel note that the third bid window of the Government of South Africa's Energy Storage Independent Power Producer Procurement Programme (BESIPPPP) was launched to procure 616 MW of energy storage capacity across five substations in the Free State . The aim is to create storage capacity for centralised dispatch instructions and boost grid capacity.
The RFP set detailed requirements, including specifications for electrochemical batteries with a minimum 4-hour duration and 70% round-trip efficiency. By the 28 November 2024 deadline, the Department received 33 bid responses.
On 30 May 2025, Electricity and Energy Minister, Dr Kgosientsho Ramokgopa announced the appointment of the five preferred bidders. Mulilo proved dominant, winning four of the five projects, with the fifth project being awarded to the international developer, Scatec. Together, the preferred bidders are expected to bring a total of ZAR 9.5 billion worth of investment into the South African economy.
The BESIPPPP was flagged as a critical initiative aimed at enhancing South Africa's power system through the provision of essential ancillary services and increasing grid capacity through energy storage. Ultimately, energy storage is fundamental to security of supply and flattening the cost curve of electricity.
New determination: Ancillary services now a key focus
On 16 May 2025, the Minister issued a section 34 Ministerial determination on the procurement of new generation capacity. The determination states that the new generation capacity is essential for the uninterrupted supply of electricity, as well as ancillary services.
While ancillary services have historically been obtained from Eskom Generation, ageing infrastructure and an increasingly unstable network have resulted in the need to procure reserves from service providers and other sources with a view to improving system stability. The Ancillary Services Standard Offer Programme includes 500 MW of instantaneous reserves, and 250 MW of regulating reserves. The buyer of such energy will be the National Transmission Company of South Africa (NTCSA).
The NTCSA has identified both reserves as essential for maintaining system frequency stability, and claims that the current generation coal fleet offers significantly less support than the required reserves to maintain the system. Ultimately, ancillary services have been identified as playing a critical role in maintaining power system stability, reliability and security in South Africa and will assist in diversifying the country's energy mix. As ancillary services enter the energy procurement space, we will undoubtedly see more service providers come to the fore and participate in what continues to be one of the country's busiest sectors.
“Many clients have are asking us about Eskom’s recent winter outlook on load shedding” says Rob Futter. Cresco has shared updated scenarios with clients that unfortunately reflect higher levels of loadshedding than Eskom’s public projections. In such scenarios, BESS plays a critical role in providing load resilience, particularly when integrated with solar PV, diesel and increasingly CNG or LPG technologies.
Jon Seelinger of Cresco notes that both behind-the-meter and in-front-of-the-meter generators will find value in smoothing of generation profiles to closely align them with either their own energy demand or that of potential offtakers. Energy arbitrage paired with evolving, more flexible, power purchase agreements and time-of-use tariffs, is where large-scale BESS can add further value by maximising generation during periods where energy demand is the highest and is therefore more valuable.
These approaches are increasingly viable even for standalone storage projects.
Jon also points out the benefits of BESS upon the introduction of the South African Wholesale Energy Market (SAWEM), balancing and forecasting of generation/demand will be very relevant for balance responsible parties (BRP). BESS can manage the resultant risk of penalties due to inaccurate forecast submissions. From a system operator perspective, balancing the grid will become increasingly challenging with the growing contribution of intermittent energy. Standby (ancillary) services to support grid balancing will further increase the demand for the development of BESS projects.
Balance responsible obligations under SAWEM
Jason van der Poel explains that under SAWEM's Market Code (Draft 1, April 2024). a BRP is "a Generator, Supplier or its chosen representative that takes physical and financial responsibility for maintaining real-time balancing at specified metering points" by submitting forecasts on the day-ahead market. The BRP is then held responsible for correcting any imbalances caused by incorrect forecasting through a settlement payment.
Balance responsibility can be triggered by a number of circumstances under the Market Code. The first trigger is having market participation status – Market Participants with or without Capacity Payment agreements are automatically BRPs under the Market Code. However, those with Capacity Payment agreements have to offer their full capacity to the SAWEM, whereas those without may choose who to sell power to or buy power from. All Eskom generators are obliged to be active Market Participants and BRPs.
Another trigger is based on capacity thresholds. Parties to the Market Code are required to register every Generator they own or control that exceeds 1 MW of Maximum Export Capacity and which is covered by a single Connection Agreement, which shall result in mandatory participation in the Market. Other triggers for becoming a BRP include being certified by NERSA and then registered by the Market Operator and participating in Southern Africa Power Pool markets.
Once an entity is balance responsible, it is required to submit forecasts of its expected energy consumption or production for each Trading Period of the relevant Dispatch Day. The schedules are required to be submitted to the Market Operator by 10h00 on the day preceding the Dispatch Day. The BRP is then required to take physical and financial responsibility for maintaining real-time balancing at specified metering points.
Crucially, BRPs are required to maintain credit cover, which is calculated by the Market Operator, and provide additional credit cover when required. The BRP is also required to re-establish credit cover within two business days after its being called upon. Arguably the most important consequence of being a BRP is being responsible for deviations between instructed energy output and actual metered energy output or consumption through an imbalance settlement for the cost of any imbalances caused to the Market.
NERSA is entitled to de-certify a BRP if they fail to adhere to the Market Code, and any Market Participants (including BRPs) may be subject to suspension for breaches including to provide the required credit cover and committing multiple defaults in a short period.
BESS will be essential for BRPs to manage exposure to penalties due to inaccurate forecast submissions and to support the smooth operation of transmission and distribution networks.
