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Engineering News Online provides real time news reportage through originated written, video & audio material. Now you can listen to the top three articles on Engineering News at the end of each day.

  1. 4 DAYS AGO

    Failure to strike right tariff restructuring balance will undermine SAWEM

    With preparations under way for the launch of the South African Wholesale Electricity Market (SAWEM) in 2026, new research highlights how decisions on the future regulated tariff structure, including the Megaflex bulk user tariff, could affect the market's objectives of advancing competition and catalysing further investment. Conducted by financial advisory services firm Cresco, the analysis has been prepared in response to both approved changes to Eskom's retail tariff plan by the National Energy Regulator of South Africa (Nersa) in early 2025, as well as possible future changes that could result in shifts in the composition of the tariff in relation to the variable and fixed cost components and time-of-use adjustments based on demand and energy supply changes. The approved changes are already having negative savings implications for consumers under the prevailing regulated-tariff regime, but will also hold significant implications for investors, producers and consumers when the SAWEM is launched. In an interview with Engineering News, Cresco executive director Robert Futter and associate director Olga Suchkova explained that, while a rebalancing of the tariff structure is required to more accurately reflect the cost structure for Eskom Distribution and the National Transmission Company South Africa (NTCSA), moving beyond certain reasonable thresholds could entrench Eskom's dominance and undermine future investment. The fixed-cost component has already increased from between 8% and 12% to closer to between 16% and 22%, depending on load or offtaker consumption profiles. However, there are indications that Eskom would like the fixed component to rise markedly, with figures of between 50% and 80% having even been mentioned. These indications have not clarified whether such a ratio would be limited to the NTCSA, which is largely a fixed-cost business, or whether they also include Eskom Generation, where the costs are mostly variable. These regulated tariff changes would also affect the SAWEM, where the hourly day-ahead wholesale price will be set at the system marginal price (SMP), which is equal to the marginal costs of the last unit in the merit order required to satisfy the demand. Suchkova explains that, in the initial phase of South Africa's market liberalisation, the SMP will initially be set during off-peak periods by the coal plants and during periods of peak demand by the expensive diesel-fuelled open-cycle gas turbines (OCGTs). All generators receive the same clearing price, regardless of their individual bid prices, as SAWEM will operate under a uniform pricing system. Therefore, generators with lower marginal costs will earn "inframarginal rents", reflecting the difference between the clearing price and their marginal costs. Cresco's theoretical forecasting and scenario analysis shows that, under a high fixed cost ratio, the SMP price will be low, which could appear attractive to consumers. However, it will also disincentivise investment by independent power producers (IPPs), as the inframarginal rents would be too low to justify the investment. Should the SAWEM fail to catalyse investment, Eskom's market dominance, which will be above 80% at the market's launch and mostly be hedged, will be entrenched, while the incentive to lower costs and increase productivity will decrease, as a large percentage of revenue is guaranteed. In addition, security of supply could also be threatened, as significant investment is required in the coming years, especially to replace decommissioned coal capacity. Incentivising other types of dispatchable generation is also key to enabling the system operator to have different tools to manage a decarbonising grid, Futter adds. He warns that there could also be unintended consequences for customers, with low load factor customers, such as households or small firms, having to pay a significant portion of the bill as a fixed charge, which could drive some off-grid. It could also result in w...

    5 min

  2. 4 DAYS AGO

    South Africa prepares for launch of a wholesale electricity market

    Engineering News editor Terence Creamer discusses the preparations that are under way for the launch of the South African Wholesale Electricity Market, or SAWEM.

    10 min

  3. 9 SEPT

    Big few months ahead in countdown to South African Wholesale Electricity Market

    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 ele...

    5 min

  4. 8 SEPT

    Nersa's approval of AMSA applications may spark fresh dispute with Eskom

    Another dispute may be looming between Eskom and the National Energy Regulator of South Africa (Nersa). This one, over the regulator's decision to approve ArcelorMittal South Africa's (AMSA's) applications for six-year negotiated pricing agreements (NPAs) for its Newcastle and Vanderbijlpark operations. In a statement, Nersa noted that Eskom had rejected the applications made by AMSA in September and October last year on the basis that the utility did not agree that they met the criteria for such tariff relief. However, following a petition by the steel group to Nersa, the Energy Regulator approved the applications at its meeting of August 28, asserting that "on a balance of scales AMSA's applications met the eligibility criteria prescribed in the Interim Long-Term NPA Framework". That framework was published by the then Department of Mineral Resources and Energy in September 2020 and listed the qualifying criteria for companies wishing to apply for NPAs, including one stipulating that their electricity load profiles should be greater than 70%. Eskom currently has 11 active NPAs, which have all been approved by Nersa, including the prices to be charged. These lower tariffs are subsidised by Eskom's standard tariff customers and in the current financial year the estimated subsidy amount is R18.8-billion. Nersa said that, following a comprehensive assessment of AMSA's application, the Energy Regulator concluded that AMSA had "substantially complied" with the prescribed criteria. However, it also stressed that the Energy Regulator had not approved a reduced tariff, but that its determination enabled AMSA to approach Eskom to negotiate a lower tariff. "It will be AMSA's decision to approach Eskom, following the Energy Regulator's decision, to apply for and negotiate a favourable tariff," full-time regulator member responsible for electricity regulation Nomfundo Maseti said in a statement. "Nersa's role is to implement and enforce the NPA Framework provisions. This means that Nersa does not intervene in price or tariff negotiations on behalf of customers," she added. Nersa also indicated that it would publish its reasons for decision (RfD) in due course. Prior to the approval Eskom had rejected AMSA's NPA applications, but the State-owned utility typically waits for RfDs before deciding whether to pursue reviews of Nersa's decisions. Eskom had indicated to AMSA and Nersa previously that, unlike the other NPAs that had been approved, the Newcastle and Vanderbijlpark applications failed to meet the criteria outlined in government's NPA framework. The key criteria not met, in Eskom's view, included the 70% load factor requirement, and the fact that electricity comprises a relatively small percentage, or less than 10%, of AMSA's total operational cost base. Eskom calculates the electricity intensity of a ton of steel at less than 1 MWh. The utility is concerned that other industrial companies could apply for NPA's should a precedent be set by the fact that AMSA only met the single criteria of its yearly consumption being greater than 80 GWh. If all such customers were given NPAs, Eskom calculates that the subsidy for the 2026 financial year would have been R62-billion and 25% of the standard tariff revenue. Given that the subsidy would be repeated yearly, extending NPAs could dwarf the recent R54-billion settlement which arose after Nersa acknowledged errors in its calculation of Eskom's regulatory asset base during the most recent tariff adjudication. The adjudication was preceded by hearings at which several Nersa regulator members raised major concerns about NPA subsidies. That said, the NPA development also comes as pressure on South Africa's industrial capacity grows, as well as after AMSA recently placed its Newcastle furnace into care and maintenance. Discussions are reportedly continuing with government on possible ways to reopen the mill and sustain AMSA's long products business, which the JSE-listed group plans to wind dow...

    4 min

  5. 5 SEPT

    First private train operators expected to enter network over coming 12 to 36 months

    Transnet CEO Michelle Phillips reports that negotiations are under way to conclude contracts with the first 11 private train operating companies (TOCs) that have qualified to take up slots on the network, but the entities have indicated that it could take between 12 and 36 months thereafter for them to begin operating. Speaking at the State-owned group results presentation in Johannesburg, Phillips said that access to rolling stock would be a key determinant of the pace at which these TOCs could enter the network and reported that Transnet was, thus, prioritising the establishment of a LeaseCo. This LeaseCo, which would be set up as a public-private partnership, would make available surplus Transnet rolling stock to the TOCs. Phillips said potential partners for the LeaseCo were in the process of being shortlisted following a prequalification process and that a request for proposals would be issued soon to select a partner with the capital, skills, refurbishment and leasing capacity needed to launch the venture. Transnet would not demand a majority equity stake in the entity, which Phillips described as a potential "game changer" in accelerating the entry of TOCs onto the network in a bid to lift rail volumes to the stated target of 250-million tons yearly by 2030. The first 11 TOCs expect to move 20-million tons yearly once they are operational, while the Transnet Freight Rail Operating Company is targeting yearly volumes of 180-million tons. In the 2024/25 financial year, Transnet reported rail volumes of 160.1-million tons, up from the 151.7-million tons reported in the previous financial year, but still well below the 226.3-million record of 2017/18. The TOCs would enter the network at their own risk, and would thus be affected not only by significant maintenance backlogs, but also by ongoing theft and vandalism, which interrupted services and caused derailments. Transnet chairperson Andile Sangqu stressed that the group, which had hitherto monopolised the rail system, was committed to opening up the network. The Transnet Infrastructure Manager, or TRIM, had been a key step in the vertical separation of the rail business, while a Network Statement was now in place, and was being updated yearly, to outline what slots were available and the tariffs for using the network. "We have introduced and welcomed competition into the rail network," he said, arguing that this would unlock growth in other sectors, including mining. Public private partnerships also feature more generally in Transnet's 'Recovery for Growth' strategy, which is guiding the current phase of an ongoing turnaround plan at a company that is trading with the support of R146-billion in government guarantees and which has debt of R144.78-billion. While protracted litigation continues to delay a propose partnership at the Durban Container Terminal Pier 2, Phillips reported progress on several other private sector participation (PSP) projects, including: A PSP to expand the Richards Bay dry bulk terminal from 18.5-million tons to 26-million tons, the tender for which will be issued this year;The Ngqura manganese export corridor PSP, which will also allow for the decommissioning of the existing terminal at Port Elizabeth, and which will go out to tender between January and March next year; and The container corridor PSP, the tender for which is planned after April next year. Transnet is also assessing responses to a request for information for PSP infrastructure projects across various other rail corridors and at its ports making further requests for proposals likely over the coming two years. Internally Transnet is expecting to sustain yearly capital expenditure at a R25-billion level with most of the investment to be directed towards the maintenance and modernisation of existing infrastructure and equipment across the rail and port systems. During the 2024/25 financial year, capital expenditure rose from R16.9-billion to R24-billion. The group also recorded a fi...

    4 min

  6. 5 SEPT

    Terence Creamer talks about: Electricity tariffs in the spotlight again

    Engineering News editor Terence Creamer discusses the reaction to a R54-billion behind-closed-doors settlement agreement between the National Energy Regulator of South Africa (Nersa) and power utility Eskom, which will result in Eskom's electricity tariffs increasing by more than

    11 min

  7. 4 SEPT

    B20 South Africa energy task force urges big upscaling in energy transition financing

    The B20 South Africa task force on energy has unveiled three recommendations that will be presented to the G20 government leaders when they gather for their yearly meeting in Johannesburg in November. The recommendations include mobilising energy transition finance at greater scale and speed, supporting industrialisation across the energy value chain, and unlocking investment in critical energy infrastructure. In an interview with Engineering News, B20 South Africa energy mix and just transition task force chairperson Daniel Mminele, who is also Nedbank chairperson, underlined the importance of transition funding, arguing that it all "begins with financing". The task force report, which was overseen by Mminele together with 12 co-chairs drawn from leading African and international energy, finance, industrial and advisory companies, specifically called for international financing for just energy transitions to be expanded by more than seven times by 2040, from $45-billion to $330-billion. "Emerging economies continue to face steep borrowing costs and limited access to capital for energy transition projects. "What is needed now is a shift toward financial models that are scalable, affordable, and aligned with national priorities," he said, while also stressing that the B20 agreed that there could be no one-size-fits-all approach to national transitions. Mminele also highlighted the view taken by B20 South Africa that the transition presented an opportunity to expand industrial capacity, with the task force arguing that the global value unlocked through industrialisation across sustainable energy value chains should be grown by five times to $11-trillion by 2040. Having previously overseen the crafting of South Africa's Just Energy Transition Investment Plan, Mminele said the recommendation gelled with South Africa's own vision to expand green industries, while also supporting skills development to cushion workers and communities affected by the shift away from coal. Notwithstanding the rise of protectionism - particularly out of the US, which will take over the G20 Presidency from South Africa at the end of the year - the task force report also recommended that resilient energy-sector supply chains could be built through improved market integration and enhanced trade partnerships. The report also emphasised the need for an expansion and modernisation of energy infrastructure to increase access to reliable electricity and enhance the climate resilience of energy infrastructure. Specifically, it argued that yearly investments into grid infrastructure should be doubled over the coming five to 25 years to $780-billion and that 80-million kilometres of grid infrastructure be modernised and/or installed by 2040. The energy mix and just transition reports was one of eight reports, containing 30 recommendations in total, handed over by B20 South Africa Sherpa Cas Coovadia to International Relations and Cooperation Minister Ronald Lamola on September 4. The others deal with digital transformation, employment and education, finance and infrastructure, industrial transformation and innovation, integrity and compliance, sustainable food systems and agriculture, and trade and investment. In the lead-up to the G20 Summit in November, which will be the first gathering of its kind in Africa, B20 South Africa plans to engage with governments, multilateral institutions and business leaders to build momentum around the recommendations. "This is Africa's global moment," Coovadia said. "We invite the world to engage with these recommendations, collaborate with us and join us in leading change."

    3 min

  8. 3 SEPT

    Treasury optimistic R2bn smart-meter scheme can help arrest Eskom arrear debt crisis

    Having rolled-out 67 000 smart meters across eight pilot municipalities in 2024/25 as part of an effort to improve revenue management at municipalities that owe Eskom billions in outstanding arear debt, the National Treasury reports that more than 77 780 such meters are expected to be installed across 11 municipalities this year. It was reported earlier in 2025 that municipality arear debt owed to Eskom had breached the R100-billion mark. Deputy director-general for intergovernmental relations Ogalaletseng Gaarekwe reports that the aim is to install 250 000 meters over a three-year horizon to 2027/28, with indirect grant funding of R2-billion having been approved for the programme. The 19 municipalities currently accredited for the smart-meter scheme are drawn from the 71 municipalities that are also participating in a separate debt-relief initiative; one that enables them to write off legacy debt owed to Eskom by meeting various conditions, including a ringfencing of payments owed to the utility and keeping their current accounts up to date. The first eight municipalities selected for the R500-million smart-meter pilot in 2024/25, were among those with the largest outstanding debts owing to Eskom, and included Bela-Bela, Dihlabeng, Emalahleni, Kgetlengrivier, Makana, Modimolle-Mookgophong, Naledi, and Sol Plaatje. MUNICIPALITIES IN FOCUS Ten of the second cohort have been drawn from the best performers in meeting the conditions of the debt-relief programme, while one is under national intervention, and they include Amahlathi, Cederberg, Dawid Kruiper, Endumeni, Enoch Mgijima, Kannaland, Mogale City, Matzikama, Ramotshere Moiloa, Raymond Mhlaba, and Ubuntu. No metropolitan councils have been included but National Treasury local government budget analysis director Sadesh Ramjathan reports that such councils are entitled to access the service providers selected under its transversal tender for smart meters, known as RT-29, should they have funding to do so. The service providers selected under RT-29, which was overseen by the National Treasury's chief procurement officer in 2023, include African Metering Solutions, Cigicell, Conlog, Isandiso, Landis + Gyr, MTN and Vodacom. These service providers are installing accredited meters that are manufactured locally and, while electricity metering is being emphasised, the RT-29 transversal tender also includes smart water meters. Some R650-million has been set aside for 2025/26, R800-million for 2026/27 and R836-million for 2027/28. None of the municipalities receive funding directly for the smart meters, with the selected service providers being paid only once there is evidence that the meters have been installed and fully integrated into the beneficiary municipality's revenue management system. Replicas of these municipal back-office revenue management systems have been created at a monitoring centre housed at the South African National Energy Development Institute, or Sanedi, which has also been appointed as the project manager for the programme. EARLY ANALYSIS POSITIVE Ramjathan says it is premature to provide firm information on whether municipalities where smart meters have been installed are meeting the objectives of improved revenue management, higher revenues and reduced arrear debt owing to Eskom. However, he reports that the initial analysis arising from two municipalities - Bela-Bela and Sol Plaatje - is promising. Adjustments have also been made to the way implementation takes place since the pilot, with a far greater emphasis being given to higher levels of community engagement ahead of any actual installations taking place. This, in an effort to persuade those showing resistance to the meters that the technology is not simply about recovering higher revenues, but also includes customer benefits such as an improved service, greater billing accuracy and transparency, with customers able to monitor their consumption in real time on their cell phones. The smart meters are ...

    5 min
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Engineering News Online provides real time news reportage through originated written, video & audio material. Now you can listen to the top three articles on Engineering News at the end of each day.

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