Power producers participating in South Africa’s proposed wholesale electricity market could face financial penalties when their actual electricity production or consumption differs from what they have committed to deliver.
The proposed South African Wholesale Electricity Market (SAWEM) seeks to introduce liability for differences between the amount of electricity a market participant contracts to produce or consume and the actual amount consumed.
The proposal could make accurate forecasting and scheduling important for electricity producers, traders and large electricity users participating in SAWEM.
These are contained in the Department of Electricity and Energy’s Electricity Sector Market Transformation Position Paper, which was published for public comment on 21 August 2026.
Producers to be held responsible
The department said these differences can arise from unforeseen changes in generation or demand.
“These deviations can occur due to unforeseen changes in generation or demand. All generators and loads (traders and eligible wholesale customers) are subject to balance responsibility.”
Under the proposed framework, generators and other eligible market participants would be financially responsible for the imbalances they create.
“They are financially liable for any imbalances they create. This ensures that market actors are incentivised to accurately schedule their production and consumption.”
The department said the market code would determine how imbalance prices are calculated and how the related costs are recovered.
“The market code will specify how imbalance prices are calculated and how these costs are recovered.”
Eskom warns of market risks
SAWEM is intended to create a more competitive wholesale electricity market where multiple generators and buyers can trade electricity, reducing Eskom’s dominance in the electricity market.
However, Eskom CEO Dan Marokane has warned that poorly designed market rules could discourage investment and result in market concentration.
He said market participants need to be able to recover their costs and earn acceptable returns on their investments.
“Otherwise, there is a risk of market concentration where only one or two participants are able to survive,” he said.
Marokane also warned that new market entrants could potentially avoid billions of rands in subsidies linked to public-interest obligations, including cross-subsidies in Eskom and municipal electricity tariffs.
He stressed the importance of establishing the right regulatory framework before the market is implemented.
“Getting the regulation right now means we are creating an environment ripe for investment and responsibly avoiding potential market delays or failure,” Marokane said.
SAWEM was initially scheduled to launch on 1 April 2026, but the National Transmission Company of South Africa (NTCSA) moved implementation to the third quarter of the 2026/27 financial year.
NTCSA said additional work was required before the market could be launched.
“Following further assessment with Nersa and industry partners, additional work is required to ensure all market, operational, and regulatory requirements are fully in place,” the company said.
NTCSA CEO Monde Bala said the introduction of the market would be an important step.
“We’re laying the foundation for a more competitive system that will support lower electricity costs, and more room for local production that will attract investment,” he said.
The Department of Electricity and Energy has invited stakeholders and members of the public to submit comments on the position paper by 20 September 2026.
