South Africa's energy transition is entering a critical phase, according to the latest Energy Market Projections report from Cresco and Standard Bank Corporate and Investment Banking. The June 2025 update builds on earlier projections from July 2024, incorporating substantial changes following November's draft Integrated Resource Plan (IRP2024), which SANEDI remodelled using a multi-nodal approach.

Cresco updates its market outlook twice yearly, drawing on real project data to help market players navigate the transition. This latest report points out that, while loadshedding ended in March 2024, the country's long-term energy security now depends on getting new capacity, including renewables, gas and storage, online quickly. And there's little margin for error.

"Securing supply while enabling economic growth is not a trade-off; it's a necessity," explains Rentia van Tonder, Head of Power at Standard Bank Corporate and Investment. "Investors and policymakers must act quickly and decisively if we're to preserve both energy stability and climate credibility."

Coal - Deferred but not yet defeated

The Cresco report highlights that the IRP2024's biggest shift is Cabinet's decision to keep Camden, Grootvlei and Hendrina power stations running until 2030. The move, designed to steady the grid while new capacity comes online, highlights the challenge of keeping the lights on while meeting environmental goals.

Although the delay conflicts with climate targets, the Climate Change Bill reinforces South Africa’s Paris Agreement commitments. By 2040, coal will account for just 25% of generation, with only five Eskom plants still operating.

"The coal extension buys us time, but it also raises the bar for everything else," says van Tonder. ”Ensuring flexibility to support growth will remain important”.

Gas - Critical but still uncertain

Gas has become the key piece in South Africa's energy puzzle, with IRP2024 planning 6GW of new gas capacity by 2030 and 10GW by 2040. However, Cresco questions whether the country can support this scale, citing slow policy and limited development. Capacity may reach 10GW, enough for today’s needs but not for 2040’s peak demand.

The report also emphasises that, while gas is essential to cover peak-hour shortfalls - especially during morning and evening demand spikes - it cannot serve as a reliable fallback without accelerated investment in pipelines and regasification, and greater policy clarity.

Renewables and storage - from ideal to imperative

Wind and solar are expected to dominate by 2040, rising from today’s 8% to 30% (80 TWh) by 2030, with 23GW of new capacity. While wind and solar can generate most of the country’s energy requirements in the day, particularly around midday, the challenge comes in the evenings when demand stays high but solar drops away.

Against this backdrop, battery storage has become essential. Cresco expects both large utility batteries and smaller private systems to play a major role in keeping the grid stable as renewables grow. Van Tonder points out the Standard Bank is on board with this thinking, having helped to arrange funding for four Round 1 battery projects that closed in 2024.

Cresco believes that large-scale storage using materials like nickel or iron ore could bring costs down, making long-duration storage affordable at scale. The planned SAWEM electricity market should also help, by creating demand for grid services and drawing more investment into batteries and other flexible technologies.

Balancing the grid - 2025 to 2040

Right now, South Africa's grid runs mostly on coal, which makes up around 80% of the total energy mix. However, Eskom's aging fleet runs at 59% availability. This means that the country faces a 2GW shortfall during evening peaks, but this can still be controlled to a certain degree by effective demand management.

The Cresco report highlights that, by 2030, the picture is going to be different – and more challenging. A combination of old coal plants shutting down, steadily rising demand and delayed gas projects could push shortfalls up to 4GW at any time. Even with renewables averaging 24% of generation, balancing the grid will become much harder.

By 2040, when renewables should dominate the energy supply mix, the country will still need reliable backup power from gas, nuclear or other sources during the hours when the sun doesn't shine.

The vital role of the private sector

Private companies and household solar are growing fast, driven by mining and industrial companies chasing net-zero targets. Rooftop solar is already cutting daytime demand from Eskom. Cresco argues that household solar could become a key balancing tool, if regulations allow grid feed-in. But it also warns that grid connections and transmission delays, rather than tariffs, are now the main roadblock to an energy secure future. This is confirmed by the fact that several renewable projects from Bid Window 7 are stuck waiting for grid access, threatening investor confidence and project timelines as companies better understand their round-the-clock power needs.

A narrow window for action

The key message of the Cresco Energy Market Projections report is that South Africa has an opportunity, but the window to act is narrow. To keep the lights on and meet climate goals, the country needs to move fast on renewables, get gas infrastructure ready, scale up storage and clear the grid connection backlog. Get any of these wrong, and loadshedding could return. Get them right, and South Africa can move closer to realising its vision of a modern, resilient and affordable power system.

“We are looking forward to the opening of the South African Wholesale Energy market by April 2026 which will open the transparency around Eskom generation and allow for more accurate energy projections,” Robert Flutter Executive Director Cresco Group.