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South Africa: A new era for electricity supply – a Hybrid Market

7 April 2024
– 2 Minute Read

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Overview

  • The Electricity Regulation Amendment Bill has been passed by the National Assembly and sent to the National Council of the Provinces for consideration.
  • The Bill is set to completely overhaul the electricity supply industry in South Africa with the establishment of a hybrid or multi-market market model comprising market transactions, physical bilateral transactions, and regulated transactions.
  • Bowmans has compiled a report summarising the key features of the design and objects of the Hybrid Market, and the extent to which the challenges facing the electricity supply industry in South Africa may be resolved by the market transition mechanisms it proposes.

On Thursday, 14 March, the Electricity Regulation Amendment Bill (Bill) was passed by the National Assembly and has been sent to the National Council of the Provinces for consideration.

This is a significant step towards the Bill being passed into law and therefore amending the Electricity Regulation Act 4 of 2006 (Act), the primary piece of legislation which governs the generation, transmission, distribution, reticulation, trading and the import and export of electricity in South Africa.

The Bill is set to completely overhaul the electricity supply industry in South Africa with the establishment of a hybrid or multi-market market model comprising market transactions, physical bilateral transactions, and regulated transactions (Hybrid Market).

The key features of the Hybrid Market incorporated in the Bill are:

  • the establishment of a central purchasing agency as the single buyer for regulated transactions including existing and future power transactions procured by the Department of Mineral Resources and Energy under section 34 of the Act and transactions with Eskom generators and distribution licensees.
  • The establishment of an open, non-discriminatory, and transparent trading platform for the competitive trading of energy amongst qualifying participants operated by a market operator, participation in which will be voluntary, i.e., a voluntary power pool.
  • A balancing mechanism, which mechanism is to be used by the System Operator to balance the supply and demand of electricity in real time where the contracted positions of generators and traders exceed or fall below their actual supply or the load demand of their customers. This article summarises the key features of the design and objects of Hybrid Market as set out in the Bill, and the extent to which the challenges facing the electricity supply industry in South Africa may be resolved by the market transition mechanisms proposed in the Bill.

Click here for our report summarising the key features of the design and objects of the Hybrid Market as set out in the Bill, and the extent to which the challenges facing the electricity supply industry in South Africa may be resolved by the market transition mechanisms it proposes.