South Africa Section 34 Determination 2026-2037: New Energy Plan Prioritizes BESS

• Minister Kgosientsho Ramokgopa announced a new South Africa Section 34 Determination 2026-2037, prioritizing battery energy storage systems (BESS) and gas-to-power.
• The plan addresses a current surplus of electricity, which poses a risk to the system and could undermine future private sector investment due to curtailment.
• BESS is central to the South Africa energy curtailment strategy, allowing surplus power to be stored and discharged during peak demand, providing grid stability.
• South Africa battery energy storage procurement will include enforceable availability and performance obligations, building on R15.4 billion invested in the first BESS bid window.
• This initiative is part of a broader Kgosientsho Ramokgopa electricity plan for transmission expansion, new industrial demand, and regional electricity trade.

This framework signals significant procurement opportunities for independent power producers (IPPs) and investors.

Dr. Kgosientsho Ramokgopa, the Minister of Electricity and Energy, has unveiled a new South Africa Section 34 Determination 2026-2037, outlining a strategic blueprint for the nation's energy future. This determination places a strong emphasis on prioritizing battery energy storage systems (BESS) and SA gas-to-power generation capacity. The overarching goal is to bolster national energy security and facilitate the integration of additional renewable energy sources into the existing grid, which has faced considerable strain over recent years.

This comprehensive plan is designed to address an immediate and evolving challenge within the electricity system. Minister Ramokgopa highlighted a paradoxical situation: the successful implementation of Eskom's Generation Recovery Plan has led to a surplus of electricity on the system. While seemingly beneficial, this surplus presents a significant and complex risk that necessitates proactive intervention to maintain grid stability and economic viability.

The prioritization of BESS and gas-to-power is a direct response to the electricity system's critical requirements for storage, flexibility, and dispatchable supply. Minister Ramokgopa articulated that failing to manage this surplus effectively could precipitate a market failure, thereby undermining future ambitions to procure new generation capacity from the private sector. This is because unmanaged curtailment arrangements would render financing for such projects prohibitively expensive, increasing the risk of project failures.

Furthermore, the current situation prevents the South African economy from fully capitalizing on the benefits of this excess generation capacity. The Department of Electricity and Energy policy explicitly positions BESS as central to mitigating this curtailment. Batteries can efficiently charge using electricity that would otherwise be curtailed and then discharge this stored energy during evening peaks or other periods of high demand. This mechanism effectively converts surplus generation into usable electricity, simultaneously providing rapid balancing capabilities and essential grid support.

The Department of Electricity and Energy, which functions as both a policymaker and a shareholder for the national power utility Eskom, has detailed the procurement strategy for South Africa battery energy storage procurement. Future BESS installations must be strategically located and operated to ensure optimal access to surplus electricity and to discharge power without exacerbating existing network constraints. The procurement process will be meticulously aligned with the system operator's specific charging and discharge requirements.

Crucially, these procurement initiatives will be supported by enforceable availability and performance obligations, signaling a robust framework for independent power producers (IPPs) and investors. The nation already possesses a foundational track record in this area, with all five projects from the initial battery storage bid window having achieved commercial close and commenced construction by last June. These projects collectively attracted a substantial R15.4 billion in investment, demonstrating the sector's potential.

The procurement of both storage and SA gas-to-power generation capacity is integrated into a broader governmental program. This comprehensive initiative encompasses critical transmission expansion projects, the fulfillment of new industrial electricity demand, and the facilitation of regional electricity trade. The Kgosientsho Ramokgopa electricity plan is designed to proactively avert market instability and ensure the long-term viability of private sector participation in the energy sector.

By strategically managing the current electricity surplus and meticulously planning for future energy needs through the South Africa Section 34 Determination 2026-2037, the government aims to significantly strengthen the nation's energy infrastructure and enhance its overall energy security for the coming decade and beyond.

This new Section 34 Determination signals significant procurement opportunities for independent power producers (IPPs) and investors in South Africa's energy sector, particularly for battery energy storage systems (BESS) and gas-to-power projects. Legal counsel should advise clients on the forthcoming tender requirements, including enforceable availability and performance obligations, and the implications of the government's strategy to manage electricity curtailment.

Source: Original reporting via local reports