Electricity is shifting into a traded, time-sensitive and increasingly differentiated commodity across Southern Africa through the commercialization of the Southern African Power Pool (SAPP) and forthcoming launch of the South African Wholesale Electricity Market (SAWEM).
Dominic Goncalves, Advisory Partner for Energy Strategy at Cresco Project Finance and Founder & Director of Naway from treating electricity as a vertically-integrated utility product as open-access reforms, corporate procurement, battery storage and regional trading create more routes between generators and consumers
“Market demand is moving from requiring the cheapest form of renewable energy towards dispatchable, firmed renewable energy that is delivered when it is required the most, not simply when it is most cheaply produced,” he explained.
Opening the regional market
SAPP, first created in 1995, is a cooperation of national electricity utilities in Southern Africa that acts as a common power grid and competitive electricity market. According to figures on its website, it now serves over 360 million people across twelve member countries and manages an operational capacity of approximately 47.7 GW.
Although it established a day-ahead market in 2009, SAPP has remained historically dominated by regional utilities, with competitive trading held back by limited transmission infrastructure.
This bottleneck is being alleonnectivity projects within the SAPP, Goncalves explained, with multiple large-scale, cross-border transmission infrastructure projects either in construction or advanced development in the region
He added that liberalization is also being driven by growing demand for renewables, as the mining, agricultural and wider commercial industries in the region look to turn to dispatchable renewable energy to replace diesel and hydropower.
“Regional power deficits, peak pricing, transmission congestion and market evolution are currently creating attractive opportunities for independent power producers (IPPs) and traders entering SAPP,” Goncalves said. “In the current phase of Southern Africa’s energy transition, transmission rights, grid access and the location of generation have become almost as important as the generation asset itself.”
Goncalves explained that a growing number of IPPs, traders and aggregators are becoming market participants on SAPP, aiming to sell and trade power across the region. However, country-specific restrictions remain and in some of the participating nations, power still has to flow through the utility.
In others, market liberalization is already well underway. Goncalves cited Zambia as the most advanced early indication of how the commercial model in the region may evolve, largely down to its open access policy enacted in 2024 and growing number of merchant and market-based projects. He added that other countries participating in SAPP may have to move beyond or modify their single-buyer policy in order to benefit from the open market to the same extent.
“Some of the countries are still operating single buyer models, but everyone in the region is looking at what’s happening in Zambia and South Africa and are almost definitely going to follow suit, just at different speeds.” Goncalves explained.
Wholesale reform in South Africa
In South Africa, the forthcoming SAWEM is set to move the country away from its long-standing single-buyer model led by state utility Eskom into a competitive, decentralized, and transparent electricity market. Originally slated for launch this year, Goncalves told pv magazine the first phase is currently likely to go live in April 2027.
“The launch of SAWEM will be an important milestone in the region and will be implemented in phases,” he explained. “Market liquidity, price discovery, credit arrangements, metering, settlement systems and participant capability will need to develop over time.”
He explained that in preparation for participation in SAWEM, energy traders in South Africa are focused on aggregating power by incorporating batteries and energy storage, while looking to secure access to renewable energy projects in different regions of South Africa and Southern African countries.
Aggregation is considered a key solution to some of the challenges facing South Africa’s renewables market, namely congestion and curtailment risks. SAWEM will facilitate aggregation by providing more transparent and flexible routes to market. “Meanwhile, aggregation pools – matching willing buyers and willing sellers – are enabling more flexible power purchase agreement (PPA) structures and shorter contracting periods” Goncalves explained.
Opportunities for market participants
Goncalves advised that the ongoing liberalization of Southern Africa’s electricity markets signals changing roles for those involved.
“For IPPs, this means that route-to-market strategy must become part of project design rather than an exercise completed after the plant has been developed. For corporate buyers, it creates the potential to procure energy products shaped more closely around their actual demand,” he explained.
“For banks and investors, it requires a shift from underwriting one contract and one offtaker towards assessing a portfolio of contracted and market revenues. For utilities and regulators, it creates the challenge of enabling competition without compromising system security or shifting unmanageable risk to consumers.”
Goncalves concluded that while the transition will continue to develop in sprints, bursts, pauses and phases, the direction is becoming clear.
“The region is moving from a model dominated by bilateral PPAs and vertically-integrated utilities towards a system in which electricity is increasingly bought, sold, balanced and optimized through competitive markets,” he told pv magazine. “The most attractive investment opportunities are unlikely to be simply another solar or wind farm. It may be the platform, product or portfolio that connects those assets to customers at the right place and the right time.”
The first article in this series covered the factors that are turning Zambia into one of Africa’s most attractive markets for renewable energy investment.
