South Africa's energy future depends on getting things right

South African The renewable energy industry has seen significant progress over the last 10-15 years, with significant growth in the last six months. The sector is set for significant growth as new regulations attempt to open up a competitive wholesale market beginning next year.

Energy wheeling – the process of using existing transmission and grid infrastructure for distribution energy Will play an important role in promoting investment to bring more renewable energy projects to fruition – from a private energy generator to the end user. But only if we approach it the right way.

The road to bringing wheeling into the mainstream has been long and while there is still way to go, the lessons learned so far are paving the way for wheeling to reach its full potential across the country and continent.

Although third-party wheeling was approved by Eskom more than a decade ago, several legacy factors remained, complicating the process in practice. Critically, tariff structures remained bundled. Furthermore, the concept of wheeling – although officially opened – was not widely understood among all stakeholders. As a result, there was a lack of clarity regarding wheeling tariffs as a subset of bundled tariffs. This has complicated product development for companies – particularly energy traders – who want to move through the South African electricity network.

In 2017, to lead wheeling-related advocacy at various industry forums, EXSA collaborated with a number of industry stakeholders to make the model open, accessible and accepted by all stakeholders. Significant work was done between the private sector, Eskom, municipalities and independent consultants to understand the costs of supply components and how these are affected in the wheeling scenario, as well as knowledge sharing across municipalities. This allowed opening up existing tariff structures and designing the future of “true” wheeling.

electricity trade

While tariffs remain largely bundled, this phase of advocacy, collaboration and knowledge-building between private companies, utilities and municipalities has enabled a clear understanding of existing tariff structures. The model can then be implemented in a wheeling environment to deliver to customers, making business sense and laying the foundation for wheeling at scale.

The first electricity trading license was granted by Nersa in 2009. Since then, the pace of license issuance has increased rapidly, especially in the last 12 months, with an estimated 23 domestic business licenses issued by December 2025.

Reading: Eskom tariffs to increase on April 1 due to Nersa mistake

EXSA received its trading license in November 2022. As one of the first energy traders to obtain a license in South Africa, the application process was complex and slow to bear fruit. However, engagement with Nersa and Eskom during this period allowed invaluable learning and understanding of licensing requirements to support and lead the refinement of the Eskom licensing process for industry and future applicants.

In the same vein, EXSA's first pilot wheeling transaction, where excess power was delivered to a customer in December 2022, allowed for testing and execution on Eskom-related wheeling and administrative processes and resulted in an understanding of how to execute in a complex and changing environment. These valuable lessons mean that EXSA can launch official “high volume” trading on five client sites six months later.

Time in the market, as well as practical experience like these pilots, have enabled trading aggregators like EXSA to build strong relationships with stakeholders across the value chain. Understanding the execution element at this stage is paramount for successful and accurate delivery of energy credits to customers on time.

regulatory reform

EXSA is currently looking to participate in the South African Wholesale Electricity Market (SAVEM), which is scheduled to launch in 2026, and we are excited about the future it offers for South Africa’s energy trajectory.

But, as the broader theme of regulatory changes shows as the government contemplates a future where customers can choose their energy supplier, this enablement of choice brings hurdles for the industry to overcome.

First, for customers to be able to choose their own supplier, there needs to be greater clarity on the rules and guardrails required to enable this customer choice.

Second, to envision a competitive market, the bundled tariff structure must be addressed to allow transparency of understanding.

Ultimately, supply and capacity are the key issues. When South Africa's aging coal plants are closed, the energy gap will widen. Although this is where renewable energy can provide a solution, there will be a need to open up grid capacity to facilitate the number of renewable projects that need to come online.

Although the path towards a liberalized South African energy market will not be without challenges, the progress made in knowledge-building, regulatory reform and private/public collaboration over the past decade has been invaluable. These lessons and partnerships provide the foundation for a future of affordable and accessible electricity that will enable a brighter, more sustainable Southern Africa.

• Author, Ayesha fellThe Chief Operating Officer at EXSA. GEAR has been actively engaged with Energy Exchange South Africa since its inception in 2017, and is playing a key role in driving the emerging electricity trading market.