Stakeholders across South Africa’s electricity sector say implementation of the South African Wholesale Electricity Market (SAWEM) is entering a more technically demanding phase with attention increasingly shifting from policy direction to operational readiness, institutional co-ordination and market credibility.
Industry participants broadly characterised the revised SAWEM timeline as a necessary measure to align regulatory frameworks, market systems and operational capabilities ahead of market opening rather than loss of momentum in the reform process.
According to Charles Hlebela, Head of Communications at the National Energy Regulator of South Africa (NERSA), the revised timeline reflects a deliberate step rather than deficiencies in the framework.
“Implementation of SAWEM requires alignment across regulatory, institutional and operational dimensions,” Hlebela says.
Several components remain outstanding, including final approval of the market design, development and validation of the market trading platform and approval of associated algorithms underpinning price formation and market integrity, he adds.
“The revised timelines reflect a jointly agreed approach to ensure that all components of the market are sufficiently aligned and ready to support a stable, transparent and credible market at launch,” Hlebela says.
Stakeholders across the private sector similarly stressed that the delay should be viewed within the broader context of South Africa’s electricity sector restructuring programme.
Energy Exchange of Southern Africa Chief Technology Officer Shailin Moodley says the reform process involves multiple stakeholders with diverse operational and technical requirements.
“This isn’t liberalisation for the sake of liberalisation,” Moodley says. “The sector is taking a very measured approach to reform for the benefit of all South Africa.”
Moodley identifies transparency around market data, pricing and policy processes, along with predictability in pricing and traded volumes, as critical requirements for a functioning wholesale electricity market. He also stresses the importance of an independent transmission system operator and market operator.
The recent submission of the Market Code to NERSA was widely identified by stakeholders as a significant milestone in the reform process. Moodley describes the Market Code as “one of the first dominoes to fall” in opening the electricity market.
Regulatory alignment and market readiness remain central concerns
Senior Business Developer at Lyra Energy Liesel Kassier says the revised timeline reflects a co-ordination challenge rather than a single point of failure.
“Reforms require alignment between historically vertically integrated institutions like Eskom, the National Transmission Company South Africa (NTCSA), NERSA and the Department of Electricity and Energy.”
Kassier identifies unresolved trading rules, vesting contracts, participant readiness and the operational capacity of the transmission system operator among the key bottlenecks ahead of SAWEM implementation. According to Kassier, vesting contracts will play an important role in determining opening liquidity and future market pricing by shaping how Eskom’s legacy generation fleet is treated within the new market structure.
“There needs to be a massive staffing and hiring process to actually allow the NTCSA division to run SAWEM.”
Despite implementation concerns, Kassier argues that the broader policy direction is becoming clearer.
“For the first time in a really long time, we actually have quite a good policy direction,” Kassier says, referencing the Electricity Regulation Amendment framework, transmission reforms, market operator licensing processes and the submission of the Market Code.
“I think where the uncertainty is creeping in is the implementation risk,” she adds.
Chairperson of the Market Development Standing Committee of the South African Wind Energy Association Happy Khambule similarly describes the revised launch timeline as prudent sequencing to ensure market readiness.
“A competitive wholesale market requires clear rules, real-time system operation, transparent pricing and robust oversight.”
Khambule notes that the transition to SAWEM introduces new operational requirements for wind independent power producers, including forecasting, dispatch optimisation, portfolio management and market participation capabilities.
“Industry must prepare just as rigorously as institutions like the NTCSA to ensure a successful and credible market transition.”
Khambule also stresses the importance of transparent market rules, credible settlement systems, balancing and ancillary services mechanisms along with improved visibility into grid operations and congestion management.
Pricing transparency and bankability remain key investor concerns
Developers and financiers also stress that transparent pricing signals and bankable market structures remain critical for future investment.
Mainstream South Africa General Manager Hein Reyneke says lenders will require clear price signals and proven contracting frameworks before financing projects directly exposed to wholesale market risk.
“Unless and until the market design is robust, fully functioning with clear price signals and bankable contracting frameworks, neither a lender nor an independent power producer would participate in the market,” Reyneke says.
Developers continue to rely primarily on bilateral agreements and corporate power purchase agreements (PPAs) rather than wholesale market participation while market structures continue to evolve, he explains.
Khambule similarly notes that the wind sector continues to structure projects around bilateral and corporate PPAs, supported by public procurement programmes and an expanding private trading ecosystem. He says traders and aggregators are increasingly playing an important role in managing mismatches between generation and demand while offering more flexible energy products to customers.
Kassier explains that Lyra Energy’s current operating model centres on aggregation within existing wheeling frameworks and Eskom tariff structures while positioning for eventual wholesale market participation. According to Kassier, the company is currently pricing risk using forward views of NERSA-approved tariff trajectories and portfolio aggregation models.
Bilateral contracting is expected to continue alongside SAWEM even after market launch, Kassier adds.
Rand Merchant Bank Infrastructure Finance Sector Lead Keith Webb says lenders generally view the revised implementation timeline as manageable, provided communication remains transparent and implementation milestones remain credible.
“It’s better to launch something properly than launch something that’s half-baked and causes issues.”
However, Webb cautions that wholesale market-linked project financing remains several years away because financiers require pricing track records, operational history and market visibility before taking meaningful exposure to merchant market risk.
Webb also identifies Eskom’s future internal trading arrangements and pricing methodologies as important indicators for future market behaviour and investment patterns across renewable generation, storage and flexible capacity.
Stakeholders broadly agree that the next phase of SAWEM implementation will depend less on policy signalling and more on operational execution, institutional co-ordination and the establishment of credible market systems capable of supporting transparent price discovery and long-term investor confidence.
