Australia's Energy Model Offers South Africa a Roadmap to Cheaper Power

Former Eskom chief executive André de Ruyter has outlined how Australia managed to bring down electricity costs—a blueprint he argues could unlock South Africa's stuttering economy. The comparison comes as South African businesses face some of the world's highest industrial energy tariffs, squeezing margins and deterring investment in a country already battling sluggish growth.

The Price Problem South Africa Cannot Ignore

South Africa's electricity costs have climbed sharply over the past decade, with industrial users paying rates that now rank among the top ten globally. Unlike competitors in Southeast Asia and parts of Latin America, South African manufacturers shoulder energy bills that eat directly into export margins. The result is a competitiveness crisis that economists say is holding back industrial expansion and keeping unemployment stuck above 30 percent.

Eskom, the state-owned utility that generates roughly 95 percent of South Africa's electricity, has repeatedly pushed through above-inflation tariff increases. Households and businesses have absorbed these rises even as the grid has suffered repeated breakdowns and scheduled power cuts become routine. De Ruyter, who led Eskom from 2020 to 2023, knows the pressures firsthand. His proposed remedies now centre on lessons from halfway across the world.

What Australia Did Differently

Australia's energy market underwent a fundamental restructuring in the 1990s and early 2000s, creating a competitive wholesale market that forced generators to slash costs to stay relevant. The Australian Energy Market Operator now runs a grid spanning multiple states, spreading risk and enabling cheaper power to flow where demand is highest. Crucially, Australia's market design encouraged private investment in generation capacity without relying on a single dominant utility.

De Ruyter has pointed to Australia's success in attracting renewable energy as a particular lesson for South Africa. Large-scale solar and wind projects, built by private developers under long-term contracts, have added gigawatts of capacity at costs far below new coal or gas plants. Queensland and South Australia have become laboratories for battery storage and grid flexibility, proving that intermittent renewables can reliably supply baseload power when paired with the right storage and transmission infrastructure.

Regulatory Reforms That Changed the Game

Australia's National Electricity Market operates under rules that punish generators who withhold capacity and reward those who respond quickly to demand signals. Price spikes still occur during periods of tight supply, but the market's structure means they are short-lived. South Africa's regulatory framework, by contrast, has been criticised for being too rigid, leaving little room for demand response or small-scale embedded generation to participate fully in the market.

The Australian Energy Regulator oversees compliance and acts swiftly against market manipulation—a credibility that has reassured investors and kept capital flowing into new projects. South Africa's energy regulator has made progress in recent years, but market participants say the enforcement record remains inconsistent, creating uncertainty that suppresses investment.

The Investment Case South Africa Is Losing

Global capital is not short of appetite for energy projects. Private equity funds, development finance institutions, and infrastructure investors are hunting for clean energy opportunities across Africa. South Africa's revised Integrated Resource Plan, which maps out new generation capacity to 2030, was supposed to signal a predictable pipeline for developers. The plan allocates substantial capacity to solar, wind, and battery storage, but procurement delays and grid connection bottlenecks have slowed actual delivery on the ground.

Battery storage projects in particular face a waiting game. The Transmission Development Plan, which governs grid upgrades, has struggled to keep pace with the location of new renewable projects, many of which are sited far from existing transmission corridors. South Africa's state-owned transmission operator has acknowledged a backlog of connection requests that stretches years into the future. Until that queue clears, private developers cannot turn planning approvals into operational power plants.

Businesses Counting the Cost

Mining companies, which are among South Africa's largest electricity consumers, have begun exploring self-generation options at a scale that would have been unthinkable a decade ago. Several platinum and gold producers have announced plans to build their own solar and wind farms, effectively exiting the Eskom tariff system. The irony is that those companies, which export minerals and earn foreign exchange, are funding their own power security rather than relying on a national utility that consumers fund through above-inflation tariff increases.

Manufacturers face a harder choice. Large factories cannot easily relocate generation equipment, and many lack the balance sheet to finance utility-scale renewable projects. They remain tied to Eskom rates that have risen by more than 300 percent in real terms since 2007. Some have responded by curbing production during peak demand periods, accepting that it is cheaper to reduce consumption than pay peak-hour rates. Others have shifted investment to countries with more affordable and reliable power.

What De Ruyter Wants South Africa to Copy

De Ruyter has argued that South Africa needs to move beyond the single-utility model that has defined its electricity sector since the apartheid era. Introducing genuine competition in generation, allowing independent transmission and distribution operators, and creating a wholesale market where prices reflect supply and demand would collectively transform the investment landscape, he contends.

The former Eskom chief has also advocated for accelerating the licensing of embedded generation projects, particularly those owned by industrial consumers or commercial property portfolios. Australia saw rapid uptake of rooftop solar and behind-the-meter battery storage once red tape was cut. South Africa could achieve similar results if the regulatory barriers currently blocking projects above one megawatt are removed, he suggests.

Next Steps for South Africa's Energy Overhaul

The South African government has committed to electricity market reform as part of its broader economic reconstruction programme. A revised Electricity Regulation Act is working its way through legislative processes and is expected to create the legal foundation for independent power producers to compete on equal terms with Eskom. The timing of that Act's passage through Parliament will be closely watched by investors who have been holding off committing capital.

Grid investment decisions made in the next eighteen months will shape South Africa's generation mix through to 2035. The question is whether policymakers will use Australia's experience as a template or continue with incremental tweaks to a system that businesses say is fundamentally broken. Markets and investors are watching for signals that the reforms will be implemented with the urgency the electricity crisis demands.