Rising electricity tariffs remain a key driver in the mass shift towards renewables, says the author. Picture: Timothy Bernard/ Indpendent Newspapers
David McDonald
Power – or the lack thereof – has been a hot-button issue in South Africa for the past few years. Every South African knows the story: ageing infrastructure meant that the grid took strain, loadshedding kicked in, business operations ground to a halt, and profitability took a nosedive…all seemingly faster than the speed of light.
Cut to 2025 and after months of no loadshedding, the country’s favourite bugbear seems to be once again making an appearance. As a result, reliable electricity remains a hot topic.The recently-announced tariff hikes will only compound this frustration.
However, there is still a greater sense of cautious optimism surrounding the future, driven by the rapid expansion of the renewable energy sector.
Four renewable energy trends that we can expect to see in 2025:
Flexibility switches on
Pantry looking a little bare? A few taps on your phone and a load of groceries will be delivered to your door within the hour. Need something good to watch? Surf Netflix or Showmax to your heart’s content. Looking for a weekend playlist? Type ‘Sunday vibes’ into Spotify and you’ll be served countless options. Just like every other facet of modern life, electricity too has entered its on-demand era.
We’re seeing a growing appetite for energy trading, where National Energy Regulator of South Africa-licensed traders buy renewable energy from different providers to sell to off-takers. Businesses are also looking for higher levels of renewables and layered solutions that they can toggle between as needed. Having greater access to sources such as wind and solar (through wheeling) paired with on-site solar and battery storage, facilitates increased cost savings, greater choice and more power security.
Alongside this is a growing desire for more flexibility in agreements with Independent Power Producers (IPPs). Until recent years, being locked into a 20-year power purchase agreement was the norm but many businesses are starting to shy away from long-term commitments, especially given South Africa’s generally turbulent economic environment.
While long-term contracts remain the most cost-effective option as they enable IPPs to pass on greater savings to customers.
This year we’re seeing a growing demand for shorter-term, more flexible contracts, as the sector moves towards a merchant market. Businesses need to know that there’s more than one way to engage an IPP, and various contract options exist depending on your risk appetite.
Rising tariffs a turn-off
Rising electricity tariffs remain a key driver in the mass shift towards renewables. In South Africa, tariffs have surged by over 450% since the onset of the power crisis, and this upward trend shows no signs of slowing. While Eskom’s requested tariff increase of 36.15% for 2025/2026 was denied, a double digit tariff increase of 12.7% was still granted by NERSA, which was announced last week. This is to be followed by a 5.36% increase in 2026/2027, and a 6.19% increase in 2027/2028.
These rising tariffs will remain a trend for some time and are set to place even greater financial strain on industries – specifically the mining, manufacturing, production and automotive sectors, which are massive energy consumers. This will further incentivise the move to a more diversified energy mix.
Companies are realising that multiple energy options exist with even more solutions expected in future. The challenge for companies will shift to discerning between the various solutions and deciding which makes the most sense to their business. This is where working with a trusted and experienced IPP is key, as they will be able to guide you on an energy strategy tailored to your specific needs.
Green grows bigger and brighter than before
Businesses in South Africa are facing mounting pressure to transition to greener energy solutions, driven by global trends and regulatory frameworks like the European Union’s Carbon Border Adjustment Mechanism (CBAM). CBAM imposes carbon tariffs on imported goods based on their carbon footprint, putting South African exporters – particularly in industries like fruit exports, automotive and manufacturing – at risk of losing competitiveness if they don't decarbonise.
Domestically, South Africa’s Carbon Tax Act has amplified the urgency for companies to shift their energy mix towards renewables. This dual pressure – alongside the expected tariff increases – is reshaping corporate energy strategies, pushing businesses to adopt renewables, invest in energy efficiency and align with net-zero goals to remain compliant and competitive.
Putting a solid sustainability framework in place isn’t a simple tick-box reporting exercise. It actually offers tangible financial, environmental and business benefits to organisations that want to differentiate themselves in the eyes of their communities and those of potential investors and employees. It just makes good business sense.
Wheeling moves into the spotlight
Electricity wheeling sees IPPs generate power that can be purchased from them directly. With no need for on-site installation, customers benefit immediately from affordable, green energy.
Electricity wheeling has slowly been gaining traction. This changes in 2025 as South Africa’s electricity tariff crisis, regulatory shifts and ongoing power generation concerns are quickly pushing businesses to find cheaper, greener and more reliable electricity alternatives.
Several municipalities, including the City of Cape Town, are actively supporting wheeling frameworks to attract investment in distributed energy solutions. These frameworks allow private power to flow through municipal grids, increasing access to alternative energy sources.
Commercial businesses need to remain ahead of the wheeling curve.
Chat to your IPPs and determine what solutions are available to you, so that – like we saw with the widespread roll-out of fibre – the necessary frameworks are in place and ready to go when it’s time to switch on.
Thanks to the rise of renewables, the energy landscape is seeing an exciting renaissance. Now is the time for companies to explore their options and secure a more sustainable, cost-effective energy future. Whether through wheeling, on-site solar or hybrid solutions, companies now have access to IPPs and energy traders that can not only diversify their renewables mix but also future-proof their business in the changing energy landscape.
David McDonald is the CEO of SolarAfrica.
BUSINESS REPORT