South Africa needs to move fast on renewables, get its gas infrastructure ready, scale up storage and clear the grid connection backlog to keep the lights on and meet climate goals.

If it gets these elements right, South Africa can move closer to realising its vision of a modern, resilient and affordable power system, say financial advisory services company Cresco and financial services firm Standard Bank Corporate and Investment Banking (CIB) in their June 2025 'Energy Market Projections' report.

Gas has become the key piece in South Africa's energy puzzle. However, questions remain about whether South Africa can support the 6 GW of new gas capacity needed by 2030 and 10 GW needed by 2040 owing to slow policy and limited development, the report notes.

Additionally, the county's capacity may reach 10 GW, which is enough for today’s needs, but is not enough for 2040’s peak demand, it adds.

Further, 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 infrastructure, and greater policy clarity, the report emphasises.

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

By 2030, a combination of old coal plants shutting down, steadily rising demand and delayed gas projects could push shortfalls up to 4 GW at any time. Even with renewables averaging 24% of generation, balancing the grid will become much more difficult.

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 does not shine, the report adds.

Meanwhile, by 2040, coal will account for just 25% of generation, with only five Eskom plants still operating, in line with the Climate Change Bill.

The Integrated Resource Plan 2024's biggest shift is Cabinet's decision to keep the Camden, Grootvlei and Hendrina power stations running until 2030. The move, which is designed to steady the grid while new capacity comes online, highlights the challenge of keeping the lights on while meeting environmental goals, the Energy Market Projections report says.

“South Africa's energy transition is entering a critical phase and there is a narrow window for action. Investors and policymakers must act quickly and decisively, if we are to preserve both energy stability and climate credibility,” says Standard Bank CIB head of power Rentia van Tonder.

“The coal extension buys us time, but it also raises the bar for everything else. Ensuring flexibility to support growth will remain important,” she adds.

Wind and solar are expected to dominate by 2040, rising from today’s 8% to 30%, or 80 TWh, by 2030, with 23 GW 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, making battery storage essential, the report states.

The report expects both large utility batteries and smaller private systems to play a major role in keeping the grid stable as renewables' share grows.

“Additionally, large-scale storage using materials, like nickel or iron ore, could bring costs down, making long-duration storage affordable at scale,” it highlights.

The planned South African Wholesale Electricity Market should also help by creating demand for grid services and drawing more investment into batteries and other flexible technologies, the report states.

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 State-owned Eskom.

Household solar could become a key balancing tool, if regulations allow grid feed-in.

However, grid connections and transmission delays, rather than tariffs, are the main roadblock to an energy secure future, the report warns.

This is confirmed by the fact that several renewables 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, it notes.

The June 2025 update of the Energy Market Projections report builds on earlier projections from July 2024, incorporating substantial changes following November's draft Integrated Resource Plan, which the State-owned South African National Energy Development Institute remodelled using a multi-nodal approach.

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