In an enlightening address at the recent launch of a consultative process seeking input into SA’s market specification document — commonly referred to as the Electricity Market Code — Operation Vulindlela’s Saul Musker dispensed with the usual government spiel filled with jargon and empty promises. Instead, he gave a crisp outline of an audacious and carefully considered plan to rebuild SA’s energy market from the ground up, at long last breathing life into the 1998 Energy White Paper.
In a nod to the president’s penchant for quoting Deng Xiaoping’s slow and cautious approach to policy reform by “crossing the river by feeling the stones,” Musker said it’s more like we’ve been staring at the river for 20 years and have now jumped in and are swimming across. Thank goodness we still have some strong swimmers in the energy sector.
Establishing a competitive wholesale energy market in SA — one that promises greater efficiency, security of supply and accessibility — was one of the founding principles of the 1998 white paper. Given the speed with which the Electricity Regulation Amendment (ERA) Bill is now finally being handled (a National Council of Provinces plenary is now scheduled to consider and vote on the ERA bill on May 16) as well as that Eskom transmission MD Segomoco Scheppers, who will head the National Transmission Company of SA (NTCSA), was quietly confident at the same launch event that the entity will begin operations in July after missing its April 1 deadline, the signs are encouraging.
Why is the Electricity Market Code so important? For one, the market specification document serves as a blueprint for the envisioned multimarket model, which aims to address the structural inefficiencies of the past monopoly megalith era and foster a far more resilient, competitive market environment. The fact is we have been slow movers, but hopefully by embracing lessons from nearly 100 countries that have undergone similar transformations already, SA is poised to implement a system that incorporates global best practice in energy reform.
Importantly, the involvement of entities such as the NTCSA, along with international support from the SA-German Energy Programme, underpins the collaborative effort required to realise these ambitious goals. The document also outlines critical mechanisms such as contracts for difference and capacity remuneration mechanisms, which are essential for attracting private investment and ensuring long-term energy security.
For business leaders and policymakers in SA, the market specification document is not just a procedural artefact; it is a strategic framework that demands active engagement and adaptation. Integrating climate risk assessments into economic planning and recalibrating business operations for climate resilience are no longer optional but imperative.
As outlined by Maximilian Kotz, Anders Levermann and Leonie Wenz in the journal Nature recently, the global climate crisis could have dire economic repercussions worldwide, with potential income reductions of up to 19% by 2050 if current environmental and policy trends persist. For SA, a region projected to face disproportionate economic downturns due to its higher per capita emissions and lower income levels, the stakes could not be higher.
This grim prognosis is not merely a cautionary tale but a clarion call for even more urgent action. SA, like many of its African counterparts, stands at a crossroad where the choice between economic prosperity and environmental degradation is starkly apparent. The newly introduced electricity market code is an ambitious step towards mitigating these risks through comprehensive energy market reform.
We’ve already observed what reforming licensing has achieved, with Musker revealing that the Energy One Stop Shop is now tracking 22GW of projects, up from 12GW 12 months ago since schedule of the act was amended to lift the cap. The equivalent of almost our entire energy output (given our average energy availability factor of about 55%) is being planned and brought to market without taxpayer money. You can bet your house on the private sector getting this done on time and within budget.
As SA finally dives headfirst into the river of energy reform, the alignment of policy, legislative frameworks and market mechanisms with the stark realities of climate and economic necessity, is crucial. The electricity market code represents a foundational step towards a future where economic growth and environmental sustainability are not mutually exclusive but are integrated components of a robust economic strategy.
This is a moment of truth for SA’s energy sector. With the right mix of policy acumen, business innovation and international co-operation, the country can navigate the currents of change and re-emerge in the post-Eskom monopoly as a leader in sustainable energy practices. The eyes of the world, and indeed future generations, will be on us.
The hinge on which this door into a brighter energy future depends is who will be given the mineral resources & energy portfolio after May 29. The incumbent, Gwede Mantashe, simply has to go. After 25 years of waiting you’ll excuse me for remaining a touch cynical about crossing the river until we are on the other side.
• Avery, a financial journalist and broadcaster, produces BDTV’s ‘Business Watch’. Contact him at Badger@businesslive.co.za.
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