South Africa has made significant progress in stabilising its electricity supply and addressing the long-standing issue of loadshedding, where controlled power cuts occur when electricity demand exceeds supply. To sustain this progress and secure energy for future economic growth, the country will need over $100 billion in new investment by 2035, marking one of the largest infrastructure programmes in its history. However, rising public debt and contingent liabilities mean that the historic model of state-guaranteed procurement through the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) can no longer be the sole avenue for new generation investment. Shifting risk from the public balance sheet to those best positioned to manage it is essential to unlock the required capital.
Electricity market reform is central to enabling this transition. The Electricity Regulation Amendment Act (ERAA) establishes the legal foundation for South Africa’s move from a regulated, single-buyer system toward a more competitive market. Reform introduces greater transparency and new routes to market, potentially unlocking capital and innovation. However, global experience shows that early-stage competitive markets often face limited liquidity, amplifying price movements and volatility, particularly with the integration of low-marginal-cost renewable energy alongside high-cost peaking plants. Without safeguards, these dynamics can discourage long-term investment in firm capacity critical for energy security.
Aggregators play a pivotal role in South Africa’s transition. Acting as commercial intermediaries, they pool demand from multiple customers and match it with supply from independent power producers (IPPs). Aggregators provide structured routes to market, flexible contracts, and scale, improving creditworthiness and access to new capacity. Their success complements central procurement mechanisms like REIPPPP, deepening liquidity and boosting investor confidence in emerging contracting pathways.
Investor caution has persisted due to the untested commercial viability of aggregators in a liberalising market. To address this, BII, in partnership with GuarantCo, launched a $100 million guarantee facility in December 2024 for Etana Energy, one of South Africa’s first licensed electricity traders. This facility provides liquidity cover, allowing Etana to manage risks such as replacing defaulting customers without requiring full debt guarantees. The credit enhancement enabled Etana to reach financial close on nearly 300 MW of wind and solar photovoltaic projects, with potential to scale to around 700 MW.
The design of the guarantee facility required an integrated understanding of credit risk and the evolving electricity market. BII used its technical assistance facility, BII Plus, to commission BCG to benchmark global electricity market reforms. The study identified key signposts, risk factors, and conditions for successful reform, informing the structure and scale of Etana’s credit enhancement. The analysis also highlighted four critical dimensions for effective electricity market reform: policy reform and market opening, third-party grid access, transmission unbundling, and market structure definition.
As South Africa liberalises its electricity market, operational and commercial challenges such as limited liquidity and price volatility must be addressed. Aggregators and traders initially manage these risks through physical strategies, including holding flexible capacity and storage, while financial instruments like futures, options, and contracts for difference gain importance as markets mature.
The launch of the South African Wholesale Electricity Market in April 2026 marks a key milestone, but market liberalisation is a gradual process involving hybrid structures that combine regulated and market-based arrangements. Flexibility, policy consistency, institutional coordination, and catalytic support from public and private investors are essential to build a competitive, investable electricity market. By establishing robust institutional, financial, and physical foundations, South Africa can achieve a modern, resilient, and competitive electricity system that underpins long-term economic growth.
