The National Transmission Company South Africa (NTCSA) has provided a detailed breakdown of the steps being taken in preparation for the launch of the South African Wholesale Electricity Market (SAWEM) – a key evolutionary step in the development of a fully competitive electricity supply industry in South Africa.

The aspirational launch date of April 1, 2026, remains in place, but NTCSA senior manager for market operations Keith Bowen has again underlined that the timeline faces several risks.

It is especially reliant on several approvals by the National Energy Regulator of South Africa (Nersa), which will be made only after public consultations have been finalised and the regulatory members had applied their minds to the far-reaching changes being proposed.

Speaking during a webinar hosted by EE Business Intelligence, Bowen said the first major regulatory milestone would be Nersa’s September 30 public hearings into the NTCSA’s application for a market operator licence.

The licence would need to be issued before the NTCSA could submit a proposed Market Code to Nersa for its approval.

The Market Code will govern the purchase and sale of electrical energy by participating generators, consumers and traders, while also setting the trading, settlement and system balancing rules needed for the functioning of the market platform.

The latest version of the code will be subjected to a final round of consultations on September 11, but the NTCSA expects approval in January or February. This, owing to the fact that it will be in a position to submit the Market Code to Nersa for approval only once it has its operator licence, which is expected to be secured in mid-November.

Nersa would also need to approve the wholesale tariff framework, while the so-called ‘vesting contracts’ between the NTCSA and Eskom Generation and Eskom Distribition would need to be finalised.

These contracts are considered to be a necessary transitional step from a monopoly market to one premised on competition, but could also have substantial implications for the success or otherwise of the SAWEM and for future investments if not carefully concluded.

TECHNICAL PREPARATIONS

Bowen said that, internally, the NTCSA was making the technical preparations required to launch the trading platform and was also in the process of recruiting and training staff in preparation for SAWEM’s launch.

A trading portal for bids, offers and scheduling should be ready for testing by November, with financial and settlement systems due by March.

The NTCSA has also launched a three-day SAWEM School to prepare other market participants – including traders, IPPs and large consumers – and is considering adding additional training days, as the current programme is heavily oversubscribed.

Graduation from the SAWEM School has been made mandatory for any participant in the market and the course has been designed to offer participants insight into the future market structure, including the roles and responsibilities of each participant.

The course exposes participants to issues such as the financial settlement processes, credit management, and risk mitigation, and includes expert-led case studies and simulations that reflect real-world market scenarios.

Despite the obvious risks to the timeline, Bowen said the NTCSA was pressing ahead to keep momentum.

“We don’t want to take our foot off the accelerator. This market is essential for building a competitive, transparent and sustainable electricity sector in South Africa.”

This sentiment was strongly backed during the Webinar by Bredesen Consulting CEO Hans-Arild Bredesen, who has more than 30 years of international experience in the design and implementation of power markets and trading arrangements, and who has been participating in the development of the SAWEM Market Code.

Arguing that, while the reform process often appeared overwhelming, it was necessary to “take a leap of faith” and launch the market, particularly given that South Africa’s electricity industry had fallen behind international developments.

However, he advised that South Africa adopt a phased approach to the development of the market, stressing that it should be an “evolution, not a revolution”.

ESKOM UNBUNDLING REMAINS KEY CATALYST

Other participants to the webinar stressed that the success of SAWEM would also depend heavily on the progress being made on various other legislative, regulatory and structural reforms. Also stressed was the need to invest sufficiently in developing the technical and human-resource capability and capacity needed to participate in the market.

SOLA Group business development manager Bronwyn Timm emphasised the need for prospective market participants to begin gearing up for the launch of the SAWEM. She argued that this would involve putting in the systems, the metering and the people that would be required for IPPs to participate as the ‘Balance Responsible Parties’ demanded by the market.

NOA Group cofounder Andrew Taylor, meanwhile, underlined the importance of Eskom’s full unbundling to ensure the independence of the NTCSA, without being fettered by the lease-back of transmission assets or being subject to a tariff composition that had an excessive fixed cost component, relative to variable costs.

Cresco associate director Olga Suchkova amplified the tariff structuring point, warning that the system marginal price, which would be used to set the day-ahead market price could be heavily influenced by the ratio between fixed and variable costs. She presented theoretical modelling showing that, in the absence of a fully functioning capacity market, a tariff with an 80% fixed cost component would favour the incumbent generators and discourage new private investment.

Webber Wentzel's Jason van der Poel said greater regulatory certainty was also required in relation to vesting contracts, balance responsibility and penalties, as well as policy certainty in relation to the approach Eskom would be taking towards SAWEM.

Van der Poel argued that Eskom’s current litigation against traders raised particular concern, “because it is a bellwether as to how Eskom Generation is thinking about the South African Wholesale Electricity Market”.