South Africa takes next step toward opening up electricity trade

Electricity pylons

Photo by Reuters

15th March 2024

By: Bloomberg


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South Africa moved a step closer toward creating a competitive electricity market after legislation that establishes the framework cleared another hurdle.

The Electricity Regulation Act Amendment Bill, which will facilitate the opening of the national power grid to private generators, was approved by the National Assembly on Thursday. The bill provides for the creation of an independent transmission system operator, a precursor to the establishment of an electricity-trading platform.

Africa’s most industrialised nation has been powered for more than a century by Eskom. The loss-making utility has failed to meet demand over recent years, resulting in rolling blackouts that have hobbled the economy, and it has been reliant on state bailouts to survive.

The government “is opening competition in the electricity market,” Mineral Resources and Energy Minister Gwede Mantashe told lawmakers in Cape Town. “The deregulation of embedded generation opens up opportunities for anybody to generate.”

Eskom’s monopoly has been slowly nearing an end as the long-delayed plans to split it into transmission, generation and distribution businesses are implemented.

Besides opening up the grid, the government has exempted private power project developers from requiring licenses and stepped up efforts to procure clean energy to reduce its reliance on coal-fired power.

“An independent transmission company that incorporates system and market operation is key to insulating the heart of the power system from Eskom’s financial woes, and ensuring fair and transparent access to the grid and energy markets,” the University of Cape Town’s Power Futures Lab said in a policy brief this month.

The bill still needs approval from parliament’s other house, the National Council of Provinces, before being sent to President Cyril Ramaphosa to sign into law. It was backed by all parties besides the populist Economic Freedom Fighters, which said it was tantamount to the privatisation of Eskom.

The Power Lab brief noted that the measure didn’t amount to privatisation because there will be no sale of public assets.

Edited by Bloomberg





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