What India’s clean-power experiment reveals about South Africa’s reform gap

A recently published report by the International Institute for Sustainable Development (IISD), Budgeting for Net Zero: Powering India’s Reliable Clean Energy Future (2025), examines how India is attempting to replace coal with clean power that is both reliable and dispatchable. While the study is grounded in Indian policy and market conditions, its conclusions carry direct relevance for South Africa as it grapples with electricity market reform under conditions of institutional stress.

The IISD report analyses India’s firm and dispatchable renewable energy (FDRE) procurement models, which combine solar, wind, and battery storage to deliver power across defined hours or profiles. The intention is explicit. Renewable energy must behave as a system resource rather than a marginal supplement. Variability is no longer treated as the grid’s problem. It is pushed back onto generators through contractual obligations.

This logic will be familiar to South African policymakers. Eskom’s system has long relied on coal to provide firmness and flexibility in the absence of mature power markets. Load-shedding exposed the cost of that dependence, but it did not remove the underlying requirement for dispatchable capacity. As South Africa pursues unbundling, market reform, and increased private participation, the same question arises. How should reliability be delivered, and who should pay for it?

India’s experience shows that clean power can meet firm demand when compared properly. The IISD study demonstrates that when renewables are benchmarked against coal on a like-for-like basis as firm power, the cost gap narrows sharply. Once health impacts, air pollution, and climate damage are included, new coal becomes more expensive than FDRE even under conservative assumptions. Coal’s apparent affordability depends on costs that sit outside the electricity tariff.

Yet the report also highlights the limits of policy workarounds. FDRE contracts require generators to guarantee delivery across peak or round-the-clock periods. To manage this risk, projects are oversized.

Generation and storage capacity often exceed contracted output, producing surplus power that cannot always be sold. This is not inefficiency. It is a rational response to rigid procurement rules in markets that do not yet price flexibility or capacity explicitly.

This mirrors a growing risk in South Africa. Procurement frameworks increasingly demand availability and performance while market institutions lag behind. The Risk Mitigation Procurement Programme is a good example of this. Storage is expected to stabilise the system, but revenue models remain narrow.

Batteries are technically capable of providing capacity, reserves, and ancillary services, even more so when synchronous condensers are included in the FDRE solution. In practice, they are remunerated almost exclusively for energy shifting. Coal plants, by contrast, receive fixed cost recovery regardless of utilisation. Reliability is rewarded when it comes from fuel combustion, but penalised when it comes from flexibility and speed.

The IISD report is clear on the underlying problem. FDRE is compensating for missing institutions. In the absence of capacity markets, ancillary service pricing, and credible demand forecasting, governments are forcing developers to internalise system risks that should sit at grid level. The lights stay on, but at a higher cost and with growing complexity.

For South Africa, this lesson arrives at a critical moment. Eskom’s operational performance has improved, but structural reform remains incomplete. Transmission constraints, lack of clarity on when the wholesale energy market will kick off, and unresolved questions about capacity remuneration and fixed costs continue to limit investment signals. Private generation is expanding, yet the system still struggles to value firmness and flexibility properly.

India’s analysis frames FDRE as an interim solution rather than an end-state. Public support is required in the early years, after which system-wide savings emerge as coal is displaced and flexibility improves. The danger lies in mistaking the workaround for the destination. Procurement models alone cannot substitute for market design.

The implication for South Africa is not that India’s approach should be copied wholesale. It is that reliability must be priced explicitly rather than embedded indirectly through contracts. Capacity, flexibility, and system services need transparent valuation. Without this, clean power will be forced to imitate coal rather than outperform it. If the wholesale electricity market kicks off without transparent valuation of these aspects of the power market, we are planning for failure.

South Africa’s energy transition will not be secured by technology alone. It will be secured when market rules reflect what the system actually needs and reward those services accordingly. India’s FDRE experiment shows both what is possible and what it costs to delay that reform.

Thomas Garner holds a Mechanical Engineering degree from the University of Pretoria and an MBA from the University of Stellenbosch Business School. Thomas is self-employed focusing on energy, energy related critical minerals, water and communities. He is a Fellow of the South African Academy of Engineering and a Management Committee member of the South African Independent Power Producers Association.

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

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