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 markedly 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 primary and most evident signpost is the actual shift in the generation mix. Progress will not be measured solely by new megawatts, but by how the new capacity alters the overall profile of the supply.
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 signals a significant trend. Furthermore, IRP 2025 shows an increased load factor for gas-to-power plants (to 50%), indicating a shift from primarily peaking to baseload use. The expansion of the energy mix targets is promising.
A significant milestone for the energy transition is already emerging, with new utility-scale solar and wind projects reaching financial close and commencing construction.
The commencement of large-scale battery storage projects is another important indicator, as it signals a shift towards grid stability.
Conversely, a major warning sign for progress would be any substantial delay in decommissioning old coal plants without adequate replacement capacity.
This may indicate a lack of confidence in the new market. Ongoing dependence on costly diesel peaking plants to fill the gap would also be a poor sign.
The looming threat of the duck/canyon curve and loadshedding will also require deliberate solutions that involve careful planning and execution.
Trader participation: the shift from contracts to a competitive market
Traders are the lifeblood of a liberalised power market (they connect generators to consumers, create liquidity, and manage 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 could increase steadily for some time. These companies facilitate bilateral PPAs and will be the key players in the future wholesale market - taking on the technological and operational burden of participation.
In late November 2025, NERSA announced a series of decisions that, collectively, aim to expedite the transition to a competitive electricity market — including the approval of the Market Operator Licence to facilitate the shift to a multi-buyer, multi-seller model, the finalisation of the Grid Capacity Allocation Rules (GCAR) for readiness-based allocation and queue management, the establishment of the Electricity Market Advisory Forum (EMAF) to enable stakeholder input and expert oversight during market development, and finally, the issuance of a notice of public participation on the draft Electricity Trading Rules[i], which the Minister of Electricity and Energy, Dr. Kgosientsho Ramokgopa, has pledged will be gazetted by June 2026.
When the sector starts offering nuanced products like short-term contracts, hedges, or derivatives, it 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 major step, though a significant one, involving extensive preparatory work such as wholesale tariff restructuring, trading rules, market code approval, market phase implementation, and vesting arrangement approval.
The President's announcement in the 2026 SONA regarding the intention to unbundle the NTCSA from Eskom, 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 most significant technical obstacle to South Africa's transition is the grid. Its expansion rate acts as a crucial indicator of progress in the energy sector.
The NTCSA's Transmission Development Plan (TDP) 2024 sets ambitious targets for new transmission lines, nearly 1,500 km annually. Consistent announcements of projects reaching financial close and starting construction are essential.
Furthermore, despite delays and industry concerns over complexities, the successful implementation of the Independent Transmission Projects Programme, attracting private investment for grid infrastructure, would be a significant step forward and a strong 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.
Additionally, the government is set to begin the first round of independent transmission projects this year.
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.
Failure to meet the TDP's annual targets would result in new renewable capacity being developed in suboptimal locations and/or unable to supply power to consumers, effectively leaving billions in potential investment stranded.
Everything hinges on private capital
Ultimately, market liberalisation is about attracting private capital, bolstered through regaining trust in the system and promoting competition.
The regulatory environment and government policy will be the main drivers of investor confidence.
While competitive market positioning existed under earlier legislation, the passage and implementation of the 2024 Electricity Regulation Amendment Act provide a critical tailwind, further strengthening the legal framework for a competitive market.
Clarity on wheeling tariffs and a transparent grid access process from NERSA are also crucial.
Leveraging the Just Energy Transition Partnership, an international collaboration between several developed markets and South Africa, will also serve as a key financial tailwind. The partnership aims to support our energy transition through initial clean energy funding projects.
While the flow of new legislation has been positive, any sign of a reversal of policy or political pushback on the transition would negatively impact the flow of much-needed capital. This could be anything from another pause on private licensing to a suboptimal market launch.
A lack of transparency in the procurement process could also discourage investors, as observed in other countries. Finally, poor municipal performance in the distribution sector skews the perception of municipalities as dependable offtakers, hindering new generation.
The transition to a liberalised energy market is not a sprint, but a marathon
South Africa’s energy landscape is set for significant change in the coming years. Trader participation, investor sentiment, grid capacity, and energy mix diversification serve as key criteria for measuring performance as we work towards a secure, reliable, and sustainable energy future. Let’s get started.