South Africa edges closer to competitive electricity market

South Africa’s long-awaited transition to a competitive energy landscape is gaining momentum.

Government has announced that the South African Wholesale Electricity Market (SAWEM) is nearing implementation following years of intensive policy design and stakeholder negotiations.

This new market-based platform is designed to dismantle Eskom’s historical monopoly on the procurement and sale of electricity. Once operational, it will enable a diverse range of buyers and sellers to trade power openly, fostering a more dynamic energy sector.

Providing an update on Phase Two of the Operation Vulindela reforms, Aalia Cassim, Acting Director for Microeconomic Policy at National Treasury, highlighted a significant milestone, the formal submission of the Market Code to the National Energy Regulator of South Africa (NERSA).

The Market Code serves as the essential rulebook for the new system, establishing clear guidelines for all participants on the platform.

Cassim noted that the introduction of competition is a strategic move for consumer relief.

“The idea is that if you have sufficient competition in the market, eventually you can get to the point where we have lower electricity price increases and potentially lower prices over the longer term.”

Beyond the trading platform, the government is moving ahead with plans to establish an Independent Transmission System Operator (TSO) within the next five years.

This entity will be responsible for managing the national electricity grid and overseeing system operations independently of Eskom’s generation business.

The creation of the TSO is viewed as a critical step for ensuring fairness across the industry.

This structure guarantees transparency for all generators and users alike. Furthermore, it allows the TSO to leverage its balance sheet to invest directly in the transmission grid, addressing long-standing infrastructure needs.