By Shailin Moodley, Chief Technology Officer at EXSA
While South Africa’s efforts to significantly decarbonise its energy mix by 2030 have been slow to get off the ground since the commitment was made in 2021, momentum increased considerably at the start of the year, with much focus on energy reform in both President Ramaphosa's State of the Nation Address and in the recent National Budget delivered by the Treasury. Now, the Department of Electricity and Energy has announced a timeline for the wholesale market phasing (contingent on regulatory, commercial, and technical enablers) - the race is on.
But there are significant challenges ahead. These four key signposts will be crucial to track South Africa’s progress on its journey to a diversified, liberalised energy market.
Capacity mix: From coal to a diversified portfolio
The first and most obvious signpost is the actual shift in the generation mix. Progress won't be measured just by new megawatts, but by how the new capacity changes the overall supply profile.
The Integrated Resource Plan (IRP) 2025 forecasts substantial new generation capacity by 2030, emphasising gas, wind, solar, and battery storage. The rapid growth of private embedded solar, especially rooftop PV, already indicates a strong trend. Furthermore, the IRP 2025 shows an increase in the load factor of gas-to-power plants (to 50%), suggesting a shift from primarily peaking use to baseload. The expansion of the target energy mix is reassuring.
A major milestone for the energy transition is already emerging, with new utility-scale solar and wind projects reaching financial close and starting construction. The beginning of construction on large-scale battery storage projects is another key indicator, as it signifies a move towards grid stability.
Conversely, a significant delay in decommissioning old coal plants without adequate replacement capacity would be a major red flag for progress. It may indicate a lack of confidence in the new market. Continued dependence on costly diesel peaking plants to fill the gap would also be a poor sign. Additionally, the looming threats of the duck/canyon curve and loadshedding will require deliberate solutions through advanced planning and careful execution.
Trader participation: The shift from contracts to a competitive market
Traders are the vital force of a liberalised power market (they connect generators to consumers, generate liquidity, and handle risk), with the number of active participants in the energy market being a key indicator of its health.
The number of licensed electricity traders and aggregators may increase gradually over time. These firms enable bilateral PPAs and will be crucial players in the future wholesale market - handling the technological and operational challenges of participation.
In late November 2025, NERSA announced a series of decisions that, together, seek to expedite the transition to a competitive electricity market - the approval of the Market Operator Licence to enable the shift to a multi-buyer, multi‑-seller ‑model, the finalised Grid Capacity Allocation Rules (GCAR) for readiness based allocation and queue management, the constitution of the Electricity Market Advisory Forum (EMAF) to facilitate stakeholder input and expert oversight during market establishment; and lastly the issuance of a notice of public participation on the draft Electricity Trading Rules[i], which Minister of Electricity and Energy, Dr. Kgosientsho Ramokgopa, has committed to have gazetted by June 2026[ii].
When the sector starts offering nuanced products (like short-term contracts, hedges, or derivatives), this indicates that the market is becoming more sophisticated. The launch and successful operation of a day-ahead market by the National Transmission Company of South Africa (NTCSA) would be the first significant step, though a substantial one, involving a lot of preparatory work such as wholesale tariff restructuring, trading rules, market code approval, market phasing, and vesting arrangement approval.
The President's announcement in the 2026 SONA about the intention to unbundle the NTCSA from Eskom[iii], and the funding announced weeks later in the National Budget Speech, are clear statements of intent and should pave the way for transparency and innovation in the private energy market.
The State of the Grid: From bottleneck to backbone
The greatest technical challenge for South Africa's transition is the grid. Its rate of expansion serves as a key indicator of progress in the energy sector.
The NTCSA's Transmission Development Plan (TDP) 2024 aims for ambitious targets, including nearly 1,500 km of new transmission lines annually. Consistent announcements of projects reaching financial close and starting construction are vital.
Additionally, despite delays and industry concerns over complexities, the successful implementation of the Independent Transmission Projects Programme, which attracts private investment for grid infrastructure, would be a significant step forward and a substantial vote of confidence in South Africa’s transition strategy. Treasury's recent announcement of a new Credit Guarantee Vehicle, in partnership with the World Bank, to encourage large-scale investment into transmission infrastructure, signals momentum in the sector. Furthermore, the government is set to commence the first round of independent transmission projects this year[iv].
That said, delays in environmental and land-use approvals for new transmission lines would be a significant roadblock - beyond which, infrastructure takes time to deploy. An inability to meet the TDP's annual targets would mean that new renewable capacity is built in a suboptimal place and/or cannot get power to consumers, effectively stranding billions in potential investment.
Everything hinges on private capital
Ultimately, market liberalisation aims to attract private capital by restoring trust in the system and encouraging competition. The regulatory environment and government policy will be the key factors influencing investor confidence.
Although competitive market positioning existed under earlier legislation, the enactment and implementation of the 2024 Electricity Regulation Amendment Act provide a significant boost, further reinforcing the legal framework for a competitive market. Clarification on wheeling tariffs and a transparent grid access process from NERSA are also essential.
Leveraging the Just Energy Transition Partnership, an international collaboration between several developed markets and South Africa, will also serve as a significant financial boost. The partnership aims to support our energy transition through initial funding projects for clean energy.
While the introduction of new legislation has been positive, any indication of policy reversal or political pushback against the transition could negatively affect the flow of much-needed capital. This might range from another halt on private licensing to an unsatisfactory market launch. A lack of transparency in the procurement process would also discourage investors, as demonstrated in other countries. Finally, poor municipal performance in the distribution sector distorts the perception of municipalities as dependable off-takers, thereby obstructing new generation.
The transition to a liberalised energy market is not a sprint, but a marathon.
South Africa’s energy landscape is set for considerable change over the coming years. Trader participation, investor sentiment, grid capacity, and diversification of the energy mix are crucial criteria for measuring performance as we work towards a secure, reliable, and sustainable energy future. Let’s get to it.
