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Gridlock loading: Act now in South Africa's renewable energy transition
As South Africa's renewable energy market grows, grid constraints pose an urgent challenge for businesses. But with decisive action and the right partnerships, it's not an insurmountable challenge.
The South African energy market is at a critical - but exciting - stage. Rising electricity costs, growing pressure to cut carbon emissions, and a national grid under strain have created the perfect push for businesses to switch to renewable energy or risk getting left behind in a high-cost, low-carbon future.
For businesses still weighing up the move, one of the biggest hurdles they will encounter sooner rather than later is securing grid access. As more renewable energy projects come online and demand continues to climb, the ability to connect new projects to the grid is becoming increasingly limited, especially in regions with the best wind and solar resources. Wait too long, and your business could miss out entirely, or you could pay more in the future to connect.
Understanding grid constraints
According to Eskom's 2025 Generation Connection Capacity Assessment (GCCA) report, the regions best suited for wind and solar projects (Eastern Cape, Western Cape, Northern Cape, and Hydra Central) are already maxed out. Other provinces still have some grid headroom, but only a few gigawatts, and that's disappearing fast.
What does this mean?
The risk is real for businesses that delay: You could miss the most favourable energy contracts and lose access to cost-effective locations. As early movers snap up prime grid connection points, latecomers may be forced to settle for less efficient, more expensive alternatives, or face long delays.
This isn't just a technical limitation. Grid access is fast becoming a strategic business risk. Acting early is essential if your business is serious about energy resilience and long-term cost certainty.
Delay or mayday?
For companies still weighing their options, the stakes of inaction are high. South Africa's electricity prices have steadily risen for years, with Eskom tariffs consistently outpacing inflation. In 2003/04, the electricity cost per kilowatt-hour (kWh) was approximately R0.16/kWh. If prices had followed CPI since then, we would be paying around R0.50/kWh today. Instead, the average cost is R2.06/kWh - four times higher than inflation-linked pricing. This trend shows little signs of easing up.
Looming carbon taxes
It's not just electricity prices that are rising. The introduction of local and international carbon taxes adds further financial pressure. By 2031, as carbon taxes increase in South Africa and current tax allowances are gradually phased out, there is expected to be a pass-through price impact on electricity that does not come from renewable sources. Over time, carbon taxes could comfortably increase electricity generation costs by more than 20%
And from early 2026, businesses exporting to Europe will also be required to pay the price differential between our lighter carbon tax regime and Europe's under the Carbon Border Adjustment Mechanism (CBAM) - where the price of carbon is approximately six times higher.
Beyond the direct costs, reputational risk is growing. As sustainability becomes a key metric for investors and consumers alike, companies that delay the transition may see their ESG (Environmental, Social and Governance) ratings suffer. This can lead to decreased investor interest and damage to brand reputation. In contrast, those that move early on will be well-positioned to enhance their market position and win over eco-conscious consumers and investors.
More than just plugging in to renewables
Beyond grid capacity, transitioning to renewable energy comes with its own set of challenges. Projects take time, often 18 to 24 months to build, with total timelines stretching to four years if permissions, negotiations and construction hit delays.
Then there are the technical and regulatory complexities.
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Regulatory and financial complexity: Securing approvals, understanding emerging policies, and structuring energy deals is time-intensive. Many businesses underestimate the expertise and capital planning required to get projects off the ground.
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Technical adjustments: Feeding renewables into the grid isn't a simple plug-and-play. It demands detailed technical planning to ensure power quality and reliability, especially when upgrading existing grid infrastructure.
These aren't reasons to wait - they're reasons to plan appropriately and partner wisely. Tackling these issues upfront is how businesses secure long-term energy savings and resilience.
Seizing the first-mover advantage
The benefits of moving quickly cannot be overstated. Businesses that act now can lock in stable, favourable pricing and secure access to projects in strategic grid positions, putting themselves ahead of their competitors and mitigating future electricity price shocks.
Discovery Green's platform gives our clients this critical head start, helping businesses navigate the transition with a clear strategy: providing access to some of the largest wind and solar plants with secure grid capacity, locking in savings and price certainty through flexible agreements, and using our unique actuarial and data science skillset to ensure energy is only delivered when businesses need it. Our expertise in navigating regulatory, financial, and technical landscapes ensures that our clients can confidently make decisions, knowing they are backed by industry-leading support and resources.
Act now
With rising electricity prices, carbon taxes, and the market demanding sustainability, the case for renewables is stronger than ever. The window to secure prime grid access is narrowing, but it's still open for businesses to move. Don't wait until the grid is loaded with your competition - act now to ensure your business is not left behind in the race towards renewable energy.
FAQs: South Africa's renewable energy grid constraints
Grid constraints refer to the limited availability of capacity to connect new renewable energy projects to the national grid. This is especially critical in high-resource provinces like the Eastern Cape, Western Cape, and Northern Cape, which are already at full capacity. Without access to the grid, new projects cannot deliver power to businesses.
Grid access allows renewable energy projects to transmit power to businesses and consumers. Without it, even fully built solar or wind farms cannot supply electricity. As demand grows, securing grid connection points becomes a key competitive advantage for businesses investing in renewables.
Delaying the transition puts businesses at risk of missing out on favourable energy pricing and grid access. They may end up paying more to connect later, face long delays, or be forced to buy power from less efficient, costlier sources. They also risk exposure to rising carbon taxes and reputational damage.
Since 2003/04, electricity tariffs in South Africa have risen far faster than inflation. If prices had followed inflation, the cost per kilowatt-hour would be around R0.50 today. Instead, the current average is R2.06/kWh - more than four times higher than inflation-linked expectations.
By 2031, South Africa's carbon tax increases and the phase-out of current allowances are expected to raise electricity generation costs by over 20% for non-renewable sources. Exporters to Europe will also face additional costs from the Carbon Border Adjustment Mechanism (CBAM), where carbon is taxed at a much higher rate.
CBAM, the Carbon Border Adjustment Mechanism, is an EU policy that charges importers the difference between their local carbon tax and Europe's. From 2026, South African businesses exporting to Europe must pay this difference, increasing their costs significantly unless they use low-carbon or renewable energy.
Most renewable energy projects take 18 to 24 months to construct, but timelines can stretch to four years with permissions, regulatory approvals, and construction delays. This makes early planning and execution essential for energy security and cost control.
Projects must meet strict technical requirements to connect to the grid and require expert planning to ensure power quality. Regulatory challenges include navigating approvals and structuring financial deals. These complexities highlight the need for the right partners and expert guidance.
Acting early secures access to grid capacity, locks in long-term energy price certainty, and strengthens ESG credentials. Businesses that move now can reduce future financial risks and gain a competitive edge in sustainability.
Acting early secures access to grid capacity, locks in long-term energy price certainty, and strengthens ESG credentials. Businesses that move now can reduce future financial risks and gain a competitive edge in sustainability.