Cape Town opens grid to private energy trading

From the newsletter

June marks the first month without new policy and regulatory changes since our policy tracker began early this year. However, some previously enacted policies have now come into effect. Cape Town opened its electricity grid for private energy trading, making it the first municipality in South Africa to do so following the liberalisation of the electricity market.

• Since February, we have tracked 29 policies and regulations across 18 African countries. The leading policy changers include South Africa (5), Kenya (4), and Nigeria (3).

• In Kenya, the World Bank's proposal to introduce a carbon tax in the 2025 Finance Bill did not succeed.

More details

• Ethiopia is developing a new, comprehensive water and energy policy aimed at ensuring equitable access, promoting sustainability, and encouraging private sector participation in the development of these crucial sectors. The policy is expected to guide development for the next two decades, emphasising the development of hydropower, along with other renewable energy sources like wind and geothermal, to meet the growing energy demand.

• Policy and regulations play a very important part in supporting Africa's renewable energy space. Most African countries have been improving their regulatory frameworks to support the sector's growth and increase access to electricity.

• A report released this month by the African Development Bank (AfDB) on the Electricity Regulatory Index (ERI) shows that the average ERI for African countries increased to 0.668 in 2024, up from 0.495 in 2022 and 0.456 in 2021. This indicates a general improvement in electricity sector regulatory frameworks. The ERI evaluates three dimensions: Regulatory Governance, Regulatory Substance, and Regulatory Outcomes.

• Kenya and Senegal claimed the top spots in the 2024 ERI, demonstrating exceptional progress in power sector governance and regulatory outcomes. Uganda, Liberia and Niger round out the top five performers, with Niger registering one of the biggest gains, underlining the strong impact of sustained reforms and political commitment to power sector development.

• Building on this trajectory will require significant policy changes. Latest initiatives like Mission 300, which targets more than 12 countries including Nigeria, the Democratic Republic of Congo, and Chad, are expected to provide the technical support needed to develop supportive policies and regulations.

Our take

• African governments must develop long-term policies to secure investor confidence in the renewable energy sector. This includes creating stable regulatory frameworks, ensuring bankable power purchase agreements, and de-risking private investments.

• The policies developed need to align regionally. This ensures a harmonised approach to development, which will facilitate cross-border trade and attract more investment targeting wider regional markets.

• Despite the progress, Africa still needs strong political will to ensure that policies and regulations in place truly serve their intended purpose. This means not only enacting sound frameworks but also committing to their full and consistent implementation.