Why energy wheeling is a critical enabler in solving South Africa’s power challenges

As more South African municipalities start to roll out frameworks that support private energy wheeling, this once-niche mechanism is quickly becoming a cornerstone of the country’s decentralised energy future. Due to constrained grid infrastructure, ageing coal plants and mounting pressure to transition to cleaner power, energy wheeling offers a practical, scalable way to connect independent generators with energy-hungry users.

Energy wheeling (wheeling), the act of using existing transmission and grid infrastructure to deliver energy from an energy generator to an end-user, is not just a technical solution but a market enabler that is gaining significant momentum. The question now is not whether wheeling will shape South Africa’s energy landscape, but how fast we can remove the remaining barriers to make it work at scale.

We don’t have the luxury of time to get energy alternatives off the ground

While loadshedding has abated for now, South Africa urgently needs alternative energy sources to stimulate economic growth sustainably. Coal currently provides almost 75% of the nation's power, but most Eskom coal plants have reached or exceeded the standard end-of-life recommendations of 30 to 40 years. While several plants have been, or are undergoing efforts to extend design life to facilitate a phased decommissioning process, there will come a time when these plants are no longer viable for upgrades. The energy gap that will emerge when these are shut down will be significant.

Coupled with this, mounting international calls for the transition to cleaner energy will increasingly put pressure on trade and industry to reduce fossil fuel consumption via penalties, tariffs and taxes.

Traditional alternative energy sources, such as nuclear and coal, can take upward of 10 years to build and we do not have the luxury of time. Conversely, renewable energy sources can get up and running much quicker, with large-scale utility solar project construction timelines of approximately 18 months and large scale wind projects approximately 24 months.

And there is a substantial pipeline of renewable projects ready and waiting for financing to be built - this is where wheeling is playing a critical role.

Wheeling holds the key to unlocking private investment in the renewable energy market

For independent power producers (IPP), a critical enabler for a project is whether there is a committed buyer for the power that will be produced. Wheeling provides another route to market for IPPs. Energy traders like Energy Exchange of Southern Africa (EXSA) typically enter into long-term agreements with multiple IPPs to bulk-buy power for onselling, thereby assuming certain risks on behalf of the end consumer and providing another route to market for generators.

Conversely, wheeling enables large energy users to access wind and solar IPPs indirectly. Contracting directly with an energy producer is a complex contractual and administrative undertaking for a company. Most large-scale solar or wind projects have long term contracting requirements of 15 to 20 years with substantial guarantees required to enable project financing, which is challenging for corporates. These contracts also necessitate complex metering, reconciliation and settlement processes that are not typically a core competency of corporate energy users. Additionally, businesses may require multiple contracts with several IPPs to ensure the right energy mix of wind and solar to meet their needs.

Wheeling moves into the middle by taking the onerous administration and contracting, complexity and risk away from end consumers as well as unlocking much-needed financing for IPPs.

Energy wheeling is gaining traction in South Africa 

In addition to the accessibility that wheeling provides in the market, it is gaining popularity within the local energy market for several other reasons. 

Firstly, wind and solar are currently the cheapest form of new energy generation globally. Wheeling can provide cost saving benefits for companies to take advantage of economies of scale inherent in these large, utility scale projects.

Secondly, companies can certify that their energy is procured from green sources via renewable energy certificates. This is particularly important for companies with international footprints and will become an increasingly attractive benefit as sustainability targets and reporting requirements evolve.

Lastly, accessing electricity via wheeling provides critical price certainty for companies. In an environment where electricity tariffs have long been increasing well above inflation, wheeling contracts are escalated on a CPI basis. This allows companies to lock in their renewable energy costs at CPI for the duration of the contract.

Roadblocks to realising the potential of energy wheeling at scale

While there is a large pipeline of renewables to be added to the grid, and hence extensive potential for wheeling, the sector is not without its challenges.

Aside from broad grid constraints, the infancy of the energy wheeling model in South Africa poses its own stumbling blocks. Several municipalities do not yet have approved wheeling frameworks in place. This means that offtakers cannot be accessed in those areas. Encouragingly, virtual wheeling, launched by Eskom in 2025, is designed to remove some of these constraints but is not yet accessible to private energy traders.

Regulations and compliance directives are evolving at a rapid rate as we move towards a competitive electricity market targeted for launch in April 2026. While the momentum is very encouraging, it requires extensive efforts from all industry participants to keep pace.

Wayne Cowie is the CEO at EXSA.

*** The views expressed here do not necessarily represent those of Independent Media or IOL.

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