2025 highlighted key trends signalling a fundamental reset in South Africa’s electricity sector, with 2026 expected to be the year in which many of these reforms begin to take practical effect.
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FreepikWith market rules nearing finalisation, infrastructure procurement advancing and new technologies gaining prominence, 2026 will test how well the sector can move from preparation to implementation.
1. Eraa commences: South Africa's move towards a competitive electricity market
The Electricity Regulation Amendment Act 38 of 2024 (Eraa) came into force on 1 January 2025, marking the formal start of South Africa’s shift from a vertically integrated monopoly to a competitive, multi-market electricity sector.
The Act establishes the Transmission System Operator (TSO) which will have responsibility for system operation, market operation and transmission operation, and be the central purchasing authority. This represents the most significant structural reform since Eskom’s inception a hundred years ago.
The Eraa expands Nersa’s regulatory mandate, introduces broader ministerial discretion on new capacity determinations, and opens a pathway for willing-buyer-willing-seller arrangements through competitive trading.
However, some ambiguities around tariff approvals and the definition of “direct supply agreements” create early interpretive challenges. 2025 serves as the structural turning point that enables South Africa’s transition towards a competitive electricity market.
2025 also revealed critical institutional tensions around municipal roles, tariff oversight, and ministerial discretion. Salga’s concerns over municipal reticulation led to delayed commencement of certain Eraa definitions, while potential litigation remains on the horizon.
2. Market code unlocks competitive electricity trading
The latest draft of the Market Code, published in July 2025, contains draft operational rules for the South African Wholesale Electricity Market (Sawem) to be administered by the Market Operator within the TSO.
It defines the roles of parties, balance responsible parties, and market participants, and establishes the framework for day-ahead, intraday, reserve, and balancing markets.
The five-year transition timeline targets a market start date of April 2026, with full operation by 2031.
Final approval of the Market Code is expected early in 2026, enabling Sawem’s planned April 2026 launch and allowing participants to begin formal market registration and onboarding.
There is a possibility that this launch date may be delayed, and private sector participants are likely only to be admitted as functional market participants in years to come.
3. Eskom challenges Nersa’s new wave of trading licences
The private electricity trading landscape shifted significantly in 2025 as the National Energy Regulator of South Africa (Nersa) granted a new wave of trading and import/export licences, signalling rapid liberalisation in the sector.
Eskom responded by launching a judicial review to set aside five of these licences, arguing that Nersa was reshaping national energy policy without clear trading rules or adequate consultation.
Although Eskom had raised no objections to similar licences issued over the past decade, it insisted that the absence of defined rules created regulatory uncertainty and risked “upending” the existing distribution framework.
Following ministerial pressure and Nersa’s decision to accelerate the publication of trading rules, Eskom has stayed its court action while participating in the rule-making process.
The dispute has highlighted deep tensions around market reform, Eskom’s future role, and fears of customer “cherry-picking” by electricity traders.
The draft Trading Rules, published by Nersa on 27 October 2025 for comment, were formally withdrawn on 29 October 2025 and they remain withdrawn pending further consultation.
Jason van der Poel, Kiera Bracher, Sabeeha Loonat and Junaid Nyker from Webber Wentzel
4. Transmission regulations and new infrastructure pipeline
A major breakthrough in 2025 was the publication of the Transmission Regulations on 31 October, providing long-awaited clarity on how new transmission capacity will be procured under ministerial determinations.
The Regulations formalise a build-operate-transfer model, introduce value-for-money transmission service agreements and provide a clear methodology for how private transmission infrastructure developers will recover their costs.
This regulatory step is critical to breaking state monopoly on grid infrastructure and enabling private sector investment in grid expansion, a necessity given the 14,500km of new high voltage lines identified as needed under the Transmission Development Plan in the next 10 years, and the 1,164km of new lines already determined for procurement through the first phase of the Independent Transmission Infrastructure Procurement Programme, under which an RFP is expected in the third quarter of 2026.
5. Battery energy storage systems
Within the transformed electricity regulatory landscape introduced by the coming into force of the Eraa, battery energy storage systems (Bess) have emerged as essential strategic assets for market participants, offering both critical risk mitigation and diversified revenue generation capabilities.
The Market Code will impose significant financial penalties on balance responsible parties for deviations between forecasted and actual energy production and consumption. Bess can smooth the output of intermittent renewable energy generation, ensuring compliance and effectively converting a potential penalty liability into a predictable operational cost.
Bess also enables power producers to sell dispatchable renewable energy, transforming intermittent generation into baseload supply and to deliver energy according to offtaker demand profiles rather than renewable resource availability patterns, commanding premium pricing in power purchase agreements.
The South African government is on its third bid window under its Battery Energy Storage IPP Procurement Programme. As South Africa progresses toward May 2031, market participants must recognise Bess not as future technology but as present necessity for competitive success in the transformed electricity sector.
6. Projects to look out for - offshore wind
In 2025, South Africa’s offshore wind sector has been characterised by foundational work and preparatory initiatives, even as formal regulatory guidance remains pending. The DEE has indicated its intention to publish an offshore wind guideline to cover key areas, but the release has been delayed.
Looking ahead to 2026, the government's focus is expected to shift from preparatory activities to the formalisation and implementation of offshore wind projects.
Key developments to monitor include the expected launch of the DEE's offshore wind guideline, strategic investor interest, and pioneering project announcements. South Africa’s vast offshore wind resources present significant growth potential.
