Eskom at the Centre of South Africa’s Energy Crossroads

South Africa’s electricity future is being reshaped around a familiar but increasingly contested name: Eskom. For decades, the state-owned utility has been the backbone of the country’s power system, supplying electricity through a fleet historically dominated by coal-fired power stations. Today, however, Eskom is trying to reposition itself in a market that is moving rapidly toward renewable energy, private investment, competitive trading, battery storage and new rules for grid access.

The launch of Eskom Green, a dedicated renewable energy business within Eskom, marks one of the most significant developments in this transition. It has been welcomed by the solar photovoltaic industry as a potential catalyst for clean-energy investment and long-term energy security. Yet it has also raised difficult questions about fairness, grid capacity, curtailment, competition and whether South Africa’s planned liberalised electricity market can truly function if some players are protected while others carry the commercial risk.

At the heart of the debate is a simple but high-stakes issue: Eskom is no longer just the country’s dominant electricity supplier. It is also becoming a renewable-energy developer, a buyer of power from independent producers, a key actor in grid operations and a central participant in market reforms. That makes the design of Eskom Green more than a corporate restructuring story. It is a test of whether South Africa can build an electricity system that is cleaner, more reliable, more affordable and trusted by investors.

Eskom Green Signals a Major Shift in the Utility’s Future

The South African Photovoltaic Industry Association (SAPVIA) has welcomed the launch of Eskom Green, describing it as a major step forward for South Africa’s energy transition. The new entity has been established as a dedicated vehicle to develop renewable energy and battery storage projects in partnership with the private sector.

For SAPVIA, the creation of Eskom Green reflects the growing importance of renewable energy and battery storage in South Africa’s future electricity mix. It also signals a shift in Eskom’s role from a utility largely associated with coal-fired generation to one seeking a more active role in clean-energy deployment.

SAPVIA chief executive Dr Rethabile Melamu described the development as a milestone for the country’s power sector.

“The launch of Eskom Green represents a significant milestone in the evolution of South Africa’s electricity sector. We call for a partnership with the private sector and members of SAPVIA, and an assurance that access to the limited grid capacity will be shared equitably by all independent power producers and players,” said Melamu.

“It signals a clear commitment to renewable energy as a core component of South Africa’s future energy mix and creates an important platform for collaboration between Eskom and the renewable energy industry. This is the kind of innovation and partnership that can help unlock investment, accelerate project delivery and strengthen long term energy security.”

The optimism is understandable. South Africa has developed significant renewable-energy expertise over the past decade, particularly in utility-scale solar photovoltaic projects and battery energy storage. SAPVIA believes this existing base of knowledge, capital and technical capability can help Eskom Green move faster and reduce execution risk.

“The South African renewable energy industry stands ready to partner Eskom Green in achieving its ambitions,” Melamu said.

“Our sector has developed world class capabilities across project development, engineering, financing, construction and operations. Through transparent, bankable and competitive partnership models, Eskom Green has the potential to unlock significant economic value while accelerating the deployment of much needed generation capacity.”

The Promise: More Clean Power, More Investment, Stronger Security

Eskom Green’s purpose is to accelerate renewable-energy deployment through partnerships with developers, financiers and technology providers. The broader ambition is to expand generation capacity while supporting South Africa’s decarbonisation objectives.

Solar PV, supported by battery storage, has already proven capable of delivering clean electricity at scale. For a country that has faced years of energy insecurity, the appeal is obvious: renewable energy can be built faster than many conventional power sources, can attract private capital and can reduce dependence on ageing generation infrastructure.

The potential economic impact is also significant. If Eskom Green is structured transparently and competitively, it could support project development, engineering, construction, financing and operations across the renewable-energy value chain. That could create jobs, support industrial development and strengthen long-term energy resilience.

But the opportunity comes with a critical condition: access to the grid must be fair.

South Africa’s renewable-energy problem is no longer only about building new generation. Increasingly, it is about whether available power can reach the national network. Grid capacity constraints are already limiting new renewable projects in several parts of the country, especially in regions with strong wind and solar resources. Without transmission expansion and clear rules for grid access, even well-financed projects can be delayed, curtailed or stranded.

Melamu put the issue directly:

“Grid availability remains one of the defining challenges and opportunities for South Africa’s energy transition,” said Melamu.

“Efforts to maximise existing grid capacity while accelerating transmission expansion will be essential if we are to unlock the next wave of renewable energy investment and deliver energy infrastructure at the scale the country requires.”

The Grid Has Become the Real Battleground

The launch of Eskom Green has intensified scrutiny of how South Africa allocates limited grid capacity. Renewable-energy developers, financiers and industry associations have repeatedly warned that transmission congestion is one of the biggest barriers to investment.

The problem is structural. New wind and solar projects are often best located in areas where natural resources are strongest, but those areas do not always have enough available transmission capacity to carry additional electricity. As more private generation, wheeling arrangements, trading models and behind-the-meter systems enter the market, grid availability becomes even more valuable.

That is why SAPVIA’s support for Eskom Green is paired with a warning. If Eskom’s own renewable projects receive preferential access to grid capacity, independent power producers may question whether the market is genuinely open and competitive. Investor confidence depends not only on policy announcements, but also on the credibility of implementation.

SAPVIA has therefore called for policy certainty, efficient regulatory processes, transparent procurement mechanisms and ongoing engagement between government, Eskom and industry participants. These issues are expected to feature prominently at SAPVIA’s annual general meeting in July, where industry leaders, policymakers and stakeholders will discuss the future of South Africa’s solar PV sector and the broader energy transition agenda.

“The launch of Eskom Green presents a unique opportunity to build on the progress South Africa has already made in renewable energy,” Melamu said.

“Success will depend on collaboration across government, Eskom, investors and industry. If we get this right and secure an equitable share of the limited grid, renewable energy can continue to drive economic growth, support industrial development, create jobs and strengthen South Africa’s energy future.”

Curtailment Is Now a Financial Pressure Point

While Eskom Green has created optimism, Eskom’s operational challenges are already weighing on renewable-energy producers. One of the most serious issues is curtailment.

Curtailment occurs when wind and solar plants are instructed to reduce output because the transmission network cannot absorb all available electricity. In theory, this is a necessary tool for managing grid stability. In practice, rising curtailment is creating major financial stress for renewable-energy independent power producers.

Under take-or-pay power purchase agreements used in the Renewable Energy Independent Power Producer Procurement Programme, Eskom is obliged to receive and pay for energy produced and provided for by green-energy producers under the terms and conditions of these projects. When output is curtailed, producers are generally entitled to claim compensation for revenue they would otherwise have earned.

However, industry participants are warning that curtailed generation is rising, payments are being delayed and administrative bottlenecks are worsening pressure on project cash flows.

Chris Yelland, managing director at EE Business Intelligence, said the financial impact on the renewable sector is substantial.

“The level of curtailment in the past was almost negligible in times when South Africa had loadshedding because every bit of energy was needed…but recently the level of curtailment has rapidly risen because demand has dropped dramatically.”

“Alternative energy has increased dramatically, and now during certain hours of the day, there is significant surplus, causing Eskom to curtail”

This marks a major shift in South Africa’s energy landscape. During periods of severe load shedding, the system needed every available unit of electricity. Now, at certain times of day, rising alternative energy supply and weaker demand can create surplus conditions that the grid cannot fully absorb.

For renewable producers, the financial consequences can be severe. Project revenues may fall below budget when plants are instructed not to generate. Payment delays then compound the problem, especially for projects financed on tight margins. Later procurement rounds, which were contracted at lower tariffs than early rounds, may have less financial headroom to absorb lost revenue.

Curtailment also raises a broader market-design question: who decides which projects are curtailed, how often, in what sequence and on what compensation timeline?

A Conflict of Roles at the Heart of the System

The concern is not simply that Eskom curtails power. Curtailment can be technically justified. The deeper issue is Eskom’s multiple roles.

Eskom is the dominant generator, a counterparty to power purchase agreements, a central actor in system operations and now the sponsor of its own renewable-energy business through Eskom Green. This creates concern among independent producers that the rules of curtailment, reimbursement and grid access must be independently governed.

If Eskom is seen as both referee and player, trust in the electricity market could weaken. That is why some industry voices argue that the National Energy Regulator of South Africa should define curtailment methodology and that an independent transmission system operator should determine the merit order and implementation.

The question is especially important as South Africa moves toward a more competitive electricity market. A diversified system with many participants requires transparent rules, independent oversight and confidence that all generators are treated fairly.

Eskom Green and the Liberalised Market Debate

Eskom Green is also drawing scrutiny from energy experts concerned about South Africa’s planned liberalised electricity market.

Specialists at Cresco and Bowmans have warned that preferential treatment for Eskom Green could undermine the credibility of market reforms. Their concern is that South Africa could end up with a market in which some generators are insulated from competition while others are exposed to real market forces.

Olga Suchkova, Associate Director at Cresco, framed the issue around the relationship between the Renewable Energy Independent Power Producer Procurement Programme and the future South African Wholesale Electricity Market.

“Our recent article on REIPPPP makes clear that the programme is flawed in its relationship to SAWEM: REIPPPP projects will be protected by the Legacy Contracts and will not meaningfully respond to SAWEM price signals,” said Suchkova.

She warned that Eskom Green could create a similar structural risk if it receives protections, bespoke offtake arrangements or preferential treatment during the transition to a competitive market.

“How will Eskom Green be positioned in the liberalised market? Will it receive special treatment? And if it does, what does that mean for the credibility of the liberalisation narrative?” Suchkova asked.

“The danger is a market with several insulated players alongside exposed participants, rather than one driven by genuine price signals.”

This debate goes to the heart of South Africa’s electricity reform agenda. If the country wants a market driven by competition, investment signals and efficient pricing, then all major participants must operate under rules that are transparent and credible.

Alexandra Felekis, Partner at Bowmans, argued that the state’s role should change as markets mature.

“The role of the State in mature, liberalised markets should be to create an enabling environment which adapts to the market developments. Only in instances where there is market failure is there a need for the State to step in as the supplier of last resort,” she said.

Cresco Advisory Partner Robert Futter added a warning about the burden of protected contracts.

“REIPPP generators are fully hedged through transition. Everyone else pays for the spread between their contracted rate and the market price,” said Cresco Advisory Partner Robert Futter.

The implication is clear: procurement frameworks must evolve. Future contracts may need to expose generators to more market pricing while rewarding flexibility, dispatchability and system value.

Gas-to-Power Adds Another Layer to Eskom’s Transition

Eskom’s future is not only about renewables. Gas-to-power is also emerging as a major part of the debate over energy security, grid stability and industrial development.

Eskom CEO Dan Marokane has argued that South Africa is closer than ever to getting gas-to-power projects off the ground. Speaking at the Africa Energy Forum in Cape Town, he said the country has a unique opportunity to use gas to strengthen energy security, support industrial growth and accelerate renewable-energy expansion.

“This is the closest we have ever been to having a perfect opportunity of landing gas-to-power in the country,” Marokane said.

“It has been tried many times, and the conditions and the thinking were not ideal. We really have a lot of things on our side this time, and we dare not lose the moment.”

Independent Power Producer Office head Precious Edward reported strong investor interest in South Africa’s inaugural gas-to-power procurement programme. The first procurement round attracted four bids representing 2 813 MW of capacity against a target of 2 000 MW.

“Gas-to-power is not just a simple electricity procurement programme,” she said.

Edward noted that gas projects require several components to be developed at once, including fuel supply arrangements, import and storage infrastructure, transportation networks, environmental approvals, grid access and long-term commercial agreements.

“The challenge is ensuring that all of these components progress at a synchronised pace so that the project remains viable and bankable.”

For Eskom, gas could provide flexible, dispatchable capacity to support a system with more wind and solar. Marokane rejected the idea that gas should be seen only as a backup fuel.

“There were some thoughts earlier on with the development of renewable energy that suggested gas is a backup plan for renewable-energy expansion,” he said.

“But what is true, based on what we saw in Australia and in Spain, is that gas is the backbone of expansion of renewable energy in terms of penetration in the energy mix.”

Eskom currently relies on diesel-fired open-cycle gas turbines during periods of system stress. Marokane argued that gas would offer a cheaper long-term alternative.

“We do have peakers at the moment running on diesel. They come in very handy when we need to use them, but we need to go into a much cheaper fuel source, and this is where gas comes in,” he said.

Eskom’s Future Role Remains Central — But More Contested

Marokane has made clear that Eskom does not see itself shrinking into the background as South Africa’s electricity market changes.

“The State is not retreating,” he said. “Eskom is not about to shrink.”

He also said the utility is focusing increasingly on affordability after restoring generation performance and improving energy availability.

“We are now focusing on the affordability issue, because it is really on available and affordable electricity that we are able to stimulate economic growth.”

Reflecting on the country’s recent energy progress, Marokane argued that South Africa has a clear strategy and improved execution capability.

“Our plans are solid, very clear,” he said. “We just have to deliver.”

That final point may prove decisive. Eskom Green, gas-to-power, transmission expansion and market reform all depend less on ambition than execution. South Africa does not lack plans. It lacks sufficient grid capacity, regulatory certainty, investor confidence and coordinated delivery at the scale required.

Why Eskom’s Next Chapter Matters

Eskom now stands at the centre of several overlapping transitions: from coal to cleaner energy, from monopoly to competition, from load shedding to system balancing, and from state-led procurement to a more complex market involving private capital and multiple generators.

Eskom Green could become a powerful platform for investment, clean-energy deployment and industrial decarbonisation. But it could also become a source of market tension if independent producers believe grid access, curtailment rules or offtake arrangements favour Eskom’s own projects.

The same applies to gas-to-power. It could provide the flexibility needed to integrate more renewables and support industrial growth. But it will require synchronised infrastructure, clear policy and bankable commercial arrangements.

South Africa’s electricity future will therefore depend on more than adding megawatts. It will depend on trust. Investors must trust the grid-access rules. Producers must trust curtailment and reimbursement processes. Consumers must trust that new capacity will improve affordability and reliability. Policymakers must trust that market reforms will deliver competition rather than simply rearrange old power structures.

Eskom remains too important to South Africa’s economy to be treated as just another utility. Its decisions affect households, mines, factories, municipalities, investors and the country’s ability to grow. The launch of Eskom Green shows that the utility is trying to adapt to a new energy era. The challenge now is to ensure that this adaptation strengthens the market rather than distorting it.

If Eskom Green is implemented through transparent, competitive and equitable partnership models, it could help unlock a new wave of renewable-energy investment. If grid capacity is fairly allocated and transmission expansion accelerates, South Africa can move closer to a cleaner and more resilient electricity system. If curtailment rules are independently governed and payments are handled efficiently, investor confidence can be preserved.

But if these issues are mishandled, the country risks slowing the very transition it is trying to accelerate.

Eskom’s next chapter is therefore not only about green energy. It is about whether South Africa can build an electricity system that is open, fair, bankable and capable of powering economic growth for decades to come.