South Africa’s electricity sector entered 2025 with a wave of structural reform but 2026 is shaping up to be the year those reforms face their first real implementation test. Market rules are nearing finalisation, new infrastructure procurement models are emerging and long-discussed technologies such as battery storage are shifting from future option to present necessity. The coming year will reveal whether institutional readiness, regulatory clarity and investment appetite are aligned strongly enough to support a competitive, modernised power system, says Mzukisi Kota, Mlungisi Mahlangu, Jason van der Poel, Kiera Bracher, Sabeeha Loonat and Junaid Nyker from Webber Wentzel.
A new market structure begins to take shape
The coming into force of the Electricity Regulation Amendment Act (ERAA) on 1 January 2025 marked a decisive shift away from South Africa’s historic vertically integrated model. The establishment of a transmission system operator responsible for system and market operation introduces the foundation for a multi-participant electricity market.
While the ERAA provides the legislative architecture, practical questions remain around tariff oversight, the role of municipalities and the interpretation of “direct supply agreements”. Institutional alignment across national government, the National Energy Regulator of South Africa (NERSA), Eskom and organised local government will be critical in determining whether reform momentum is sustained or slowed by jurisdictional friction.
SAWEM moves closer to reality
The draft Market Code published in 2025 provides the most detailed view yet of how the South African Wholesale Electricity Market (SAWEM) is expected to function. The framework introduces day-ahead, intraday, reserve and balancing markets as well as the concept of balance responsible parties.
An April 2026 market start date has been targeted although delays remain possible. Even if participation broadens gradually, the transition towards formal market scheduling and balancing represents a major operational shift for generators, traders and large consumers. The ability of participants to adapt to forecasting, settlement and compliance requirements will shape early market confidence.
Transmission reform opens the grid to new capital
The publication of transmission regulations in late 2025 created long-awaited clarity on how privately developed transmission infrastructure may be procured and financed. The introduction of a build-operate-transfer model and value-for-money transmission service agreements signals a structural break from a fully state-led grid expansion model.
Given the scale of network reinforcement identified in national transmission planning, the success of these regulations will be measured by the market’s response. Investor confidence in cost recovery mechanisms and regulatory stability will determine whether private capital can meaningfully accelerate grid expansion.
Gas re-enters the planning conversation
After a prolonged period of uncertainty, the relaunch of the Gas Independent Power Producer Procurement Programme suggests renewed government focus on dispatchable generation to support system reliability. Revised procurement documents aim to address bankability concerns and may help unlock liquefied natural gas import infrastructure and, potentially, domestic gas resources over time.
Gas remains a debated element of South Africa’s energy future but its role in balancing variable renewables and supporting system adequacy keeps it central to near-term planning.
Trading reform reveals institutional tension
The expansion of electricity trading licences issued by NERSA in 2025, and Eskom’s subsequent legal challenge, highlighted the sensitivity of market liberalisation. Although court action has been paused, the episode underscored the absence of finalised trading rules and the competing interpretations of how quickly competitive supply should evolve.
How trading frameworks are ultimately settled will influence municipal revenue models, customer choice and the pace at which private supply arrangements scale.
Storage becomes a market necessity
Battery energy storage systems are moving from demonstration projects to strategic assets within the emerging market framework. Under the Market Code, deviations between scheduled and actual supply will carry financial consequences. Storage provides a means of managing this risk while also enabling renewable generators to offer firmer supply profiles.
As procurement programmes advance and market participation rules solidify, storage is increasingly being viewed not only as a technical solution but as a financial and operational tool within a competitive electricity system.
Offshore wind and new technologies wait in the wings
While formal regulatory guidance for offshore wind remains pending, preparatory work and investor interest continue. If policy clarity emerges, offshore wind could become a significant component of South Africa’s longer-term supply mix, adding further complexity to grid planning and market design.
A year of execution ahead
Taken together, these developments suggest that 2026 will be defined less by new policy announcements and more by the practical implementation of reforms already set in motion. Institutions will need to translate frameworks into functioning systems, market participants will need to adapt to new rules and investors will assess whether regulatory stability justifies long-term commitments.
The direction of reform is clear. The challenge now lies in converting structural change into operational reality across a power system that is becoming more decentralised, more competitive and more technologically diverse.
