Overcoming Financial and Capacity Barriers to Empower Small‑Scale Enterprises in South Africa

Annex F. Renewable microgrids in South Africa

The role of renewable microgrids in South Africa’s electrification efforts

Household electrification levels in South Africa

Over the past 30 years, South Africa has made significant progress in achieving reliable and affordable electricity for all its citizens, raising the level of electrification from 58% in 1996 to 94.7% in 2022 (Department of Electricity and Energy, 2025[1]). With a total investment of ZAR 110 billion (~USD 6.7 billion) investment over the past 30 years, 8.4 million households were connected to the grid, and more than 200 000 obtained access through off-grid technologies, mainly relying on SHS. Between 2011 and 2022, most improvements took place in rural municipalities, where the backlog decreased by more than 541 000 households (Statistics South Africa, 2024[2]). Access to electricity is, however, measured as the percentage of households that use electricity for lighting services only, without considering higher energy uses.

Approximately 1.6 million households remain without access to electricity, which could amount to roughly three million households when considering illegal connections (Department of Electricity and Energy, 2025[1]). Based on average household size of 3.2 people, this would translate into 9.6 million unelectrified people). In rural provinces with low population density such as Limpopo, Mpumalanga, Eastern Cape and Northern Cape, last-mile electrification is more challenging to achieve. In Mpumalanga and the Western Cape, an estimated 95 000 and 87 000 households remain without access to electricity, representing 6.7% and 3.8% of total households in the provinces, respectively. Within Mpumalanga, household electrification rates vary across district municipalities, ranging from 96.1% in Ehlanzeni to 91.5% in Gert Sibande and 91.3% in Nkangala (Statistics South Africa, 2024[2]).

While electrification rates give an indication of the share of households using the most basic electricity services, this does not record access to higher service levels which would be necessary to run appliances or equipment with higher electricity consumption, including for productive uses. All microgrid solutions considered under South Africa’s Integrated National Electrification Plan (INEP) can provide the needed service levels to achieve access to electricity.

South Africa’s Electricity Infrastructure Quality Index (EIQI) classifies the infrastructure based on the level of service that households have access to with an index score of 1 (no service) to 5 (full service). In alignment with the definition of access to electricity, the EIQI, only tracks the level of lighting services provided – ranging from not using electricity for lighting to fully using it. All provinces across South Africa obtained a score of 4.7 or higher, with a national score of 4.8 in 2022 and little variation between different categories of municipalities, from rural to metropolitan ones. It is, however, important to note, that the index does not indicate the service quality of other electricity uses such as cooling or cooking. Furthermore, the index only implies that a significant portion of households in a particular municipality have access to electricity in their homes, yet not all of them. (Statistics South Africa, 2024[2]).

Figure A F.1. Most households in Mpumalanga and the Western Cape have access to electricity

Percentage of households using electricity for lighting in Mpumalanga and the Western Cape, 2022

Source: (Statistics South Africa, 2024[2]).

Despite high electrification rates for basic services, many households continue to use alternative energy sources for cooking due to the relative cost and reliability of electricity and the widespread availability of substitutes including wood and coal. In 2022, for Mpumalanga province, 11.5% of households still mainly used wood, coal or charcoal for cooking in 2022. On a national level, almost 26% of households used LPG/natural gas for cooking in the same year as a result of load-shedding (Statistics South Africa, 2024[2]). Only microgrid solutions of Type 2 and upwards under the INEP (Typology in Section 6.2.4.) would be able to provide access to both lighting and other appliances to cover energy demand for cooking/

The role of renewable microgrids in electrification efforts

Microgrids can electrify unserved or underserved communities in remote areas where grid extensions are technically or financially unfeasible. Microgrids can further be designed for grid-readiness; interconnected microgrids in urban and peri-urban areas can support grid densification and enhance the quality of electricity service delivery by reducing the strain on the national grid and can contribute to unlocking private investment in distribution networks (RMI, 2025[3]). Interconnected microgrids, however, require agreement between developers, utilities and consumers on service provision. This may become challenging where existing utilities perceive microgrids as competition.

Solar home systems, on the other hand, are small, standalone systems consisting of solar panels, a battery and charge controller to power individual households with only basic energy needs like lighting, mobile phone charging and small appliances like fans. Such systems are an important component of electrification strategies for remote areas with low energy demand and low population density. Since they do not rely on any form of grid infrastructure, and for standalone systems do not require licensing or tariff frameworks, they provide faster electricity access than microgrids or grid expansions but cannot power higher consuming appliances or enable productive uses.

Communities in informal settlements are often under-served with only partial and unreliable electricity supply, including due to grid overloading and illegal connections. In such contexts, integrated microgrids or solar home systems have successfully been implemented. The iShack project, for instance, provides SHS mainly as “interim service delivery” to clients in informal settlements in Stellenbosh and Cape Town while they wait for grid connection (iShack Project, 2026[4]).

Definitions of mini-grids and microgrids vary and are sometimes overlapping. The International Energy Agency (IEA) defines mini-grids as small electric grid systems, not connected to main electricity networks, linking a number of households and/or other consumers (IEA, 2026[5]) Microgrids refer to a group of interconnected loads (energy consuming devices) and energy sources acting as a single controllable and self-sufficient entity; it typically does not exceed a few megawatts of total capacity and serves a discrete local area, such as a campus, hospital complex, industrial zone or neighbourhood (IEA, 2026[5]). While South Africa does not have a consensual definition of mini-grids, Eskom defines microgrids as a collection of interconnected loads and distributed energy resources with clear electrical boundaries acting as a single controllable entity with respect to the utility grid, which can be operated in island mode or grid-tied (Eskom, 2026). Given that the term microgrids is more commonly used in South Africa, this report applies the term microgrids to all systems regardless of capacity and whether they are isolated or grid-integrated.

Microgrids typically provide higher service levels than standalone systems, often ranging from roughly 50 to 2 000 kWh per household and year (Granville Energy, 2025[6]; Carbon Trust, 2017[7]), corresponding to Tiers 2-4 of the Global Tracking Framework. Particularly the higher service levels can contribute to socio-economic development by enabling productive uses of energy such as agri-food processing, cooling and cold storage, flour milling and others. Eskom’s pilot microgrid in Ficksburg, for instance, currently registers around 45 kWh monthly energy consumption per household, or 540 kWh per household per year. This is well above the average energy demand from households connected to microgrids across Africa, which amounts to only 9kWh/month or 108 kWh annually (IEA, 2025[8]). Renewable-powered microgrids can rely on a range of generation sources, including solar PV, wind or mini-hydropower. Solar powered microgrids appear particularly promising thanks to South Africa’s high solar irradiation and limited seasonality, although site-specific assessments may identify promising potential for other renewable energy sources.

Prioritising stimulation of economic activities and, where feasible, planning for microgrids with electricity service levels allowing productive uses is essential to generate broader socio-economic benefits and improve the long-term economic viability of microgrids. To ensure or improve commercial viability of microgrids, demand can be stimulated and stabilised through incorporating productive uses of energy (PUE) and dedicated anchor loads. Experience from the implementation of 43 microgrids across Africa under the Energy and Environment Partnership showed that financially sustainable microgrids often identified and negotiated an offtaker-agreement with an anchor load client (e.g. agro-processing company, healthcare centre) and identified or helped develop small businesses and thereafter targeted domestic consumers (EEP Africa, 2018[9]).

Businesses in Sub-Saharan Africa consume between two to three times more energy per connection than households, while public institutions like healthcare centres or schools, can use up to six times more energy (IEA, 2025[8]). Increasing the coverage of such anchor loads to between 30-40% can significantly mitigate the financial risks of low and volatile demand and allow microgrid developers to deliver electricity services to households at more affordable rates. This can also enable the extension of electricity services to poorer households and small enterprises (Lemaire, 2025[10])

Ensuring the inclusion of anchor loads such as businesses and public institutions in microgrid projects helps to increase and stabilize overall energy demand connected to the microgrid, thus, contributing to enhanced financial sustainability (Figure A F.2).

Figure A F.2. Despite low consumption levels, households account for the largest share of energy use

Energy demand (Wh/day) by microgrid end-user type, sub-Saharan Africa, 2020-2024

Source: (IEA, 2025[8]).

The scaling up of microgrids across African countries, including South Africa, can help support small businesses in rural and remote areas. While powering essential public services like lighting, cooling for medication in health facilities, or running school computers in educational facilities, microgrids focusing on enabling productive use of energy (PUE) to also power small businesses, thereby stimulating local economic activity and creating jobs. This improves broader socio-economic benefits in terms of improved health, better education and higher safety, but also raises economic sustainability in the long run, as higher and more stable demand reduces risks for private sector investment and leads to better returns.

Many countries, including South Africa, are facing difficulties in developing tariff structures that ensure financial sustainability and affordability for households and MSMEs. Microgrid tariffs are often two or three times higher than national grid tariffs, placing pressure on community affordability and the long-term viability of microgrid projects (AMP, 2026[11]). National grid tariffs, however, are often not cost-reflective due to cross-subsidisation. If microgrid tariffs are defined too closely to national grid tariffs to protect end users, developers will have to secure higher levels or grant funding or subsidies to achieve financial viability. South Africa does not yet have a regulatory framework or dedicated microgrid tariffs in place. While a national definition for micro- or mini-grids has yet to be determined and the legal basis for microgrids as a licensable activity created, there are discussions involving the DEE and the National Energy Regulator of South Africa (NERSA), among others, for drafting such a regulatory framework for microgrids. For Eskom’s microgrid projects, an area-based grid tariff, the so-called Ruraflex tariff, is being applied, which is not cost-reflective of microgrid projects.

Improving microgrid planning and capacity utilisation is essential to develop cost-effective microgrids. Accurately determining expected energy demand and load profiles of the unelectrified community (including businesses, public institutions and other anchor loads) is, however, critically important to right-size the microgrid project for cost-effectiveness. If the grid capacity is designed for potential future loads that may not materialise, projects costs increase and the capacity utilisation will likely not suffice to ensure financial viability. Improving microgrid capacity utilisation can be achieved through different approaches, including (i) calibrating system capacity based on accurate data (e.g. current energy spending or agricultural output), (ii) increasing flexibility by using a modular approach that allows for later grid expansion in line with demand growth, and (iii) implementing demand stimulation and load management programmes (RMI, 2019[12]). This reduces the levelised cost of electricity (LCOE) from the microgrid systems and improves customer affordability and can be integrated into project design and funding programmes.

If target communities of microgrid electrification programmes, however, do not yet engage in relevant economic activities, electrification alone will not suffice to enable sustainable economic diversification. In this case, a combination with targeted demand stimulation and rural development programmes could help in creating entrepreneurial activities and improving access to efficient appliances and equipment for the community. The Sustainable Energy for Smallholder Farmers (SEFFA) Programme in Ethiopia, Kenya and Uganda, for instance, which was implemented during 2021 and 2024, supported productivity gains through the uptake of solar water pumps, dryers and cooling in agricultural value chains for over 5 300 smallholder farmers by providing access to technology, financing and capacity building (Endev, 2024[13]). Similarly, to stabilise demand and stimulate local economic activities, some microgrid developers sell energy efficient appliances and equipment at preferential rates.

South Africa’s electrification plans

South Africa’s Integrated National Electrification Planning (INEP) unit was established in 2001 within the then Department of Energy to address backlogs of households in line with the recommendations of the 1998 Energy White Paper. In 2013, the Cabinet approved a new Household Electrification Strategy defining universal access as 97% of all households, as full electrification seemed unlikely to achieve in light of population growth and delays in formalising informal settlements. The strategy foresaw 90% of households being connected through the national grid, with the remaining 10% relying on high-quality non-grid solar home systems or other possible technologies (Department of Energy, 2014[14]). In line with SDG7, the Integrated National Electrification Programme (INEP) aims to achieve universal access to electricity by 2030 through a mix of grid connections and decentralised solutions. In practice, off-grid electrification efforts mainly focused on the deployment of SHS, with microgrids only playing a minor role until relatively recently.

“South Africa’s Just Energy Transition” (JET) framework, approved in 2022, aims to transition the economy from fossil fuels to cleaner energy and accelerate the decarbonisation of key sectors. Increasing energy security and ending load-shedding through a massive rollout of new, sustainable energy sources, are among the key interventions of the JET Investment Plan (JET-IP) for 2023-27 (The Presidency, Republic of South Africa, 2022[15]). Standalone systems and solar-powered microgrids are considered as potential electrification solutions for households in informal settlements and new formal housing developments as part of a Municipal Just Energy Transition. As this would require a better understanding of ownership and governance structures, among other factors, the JET-IP proposes case studies and best practice sharing, as well as pilot projects to stimulate suppressed demand using microgrids and solar water heaters (geysers), while testing social ownership models (The Presidency, Republic of South Africa, 2022[15]).

The South African Renewable Energy Master Plan (SAREM), adopted in 2025, is a key policy document to accelerate renewable energy deployment across South Africa and anchor industrial development in the local renewable energy and storage value chains, which has positive implications for renewable microgrids. It aims to grow the South African economy by fostering the rollout of renewable energy and battery storage projects, and supporting the inclusive shift towards a decentralised, low-carbon electricity supply, among other measures. It further recommends the acceleration of the INEP’s microgrid electrification efforts for unserved or underserved areas, using local suppliers, and exploring the scaling up of community-owned projects and the widespread rollout for low-income households through pilot projects. Based on the pilot findings, dedicated policy interventions including low interest loans, grants, dedicated funds, skills development and capacity building, as well as technology transfer plans can be implemented to facilitate socially-owned projects (Department of Electricity and Energy, 2025[16]).

The new INEP action plan to achieve universal electricity access by 2030, approved by the Cabinet in September 2025, adopts a hybrid approach combining grid connections and decentralised systems, placing stronger emphasis on microgrids. Keeping with the national definition of universal access under previous electrification plans, it aims to meet basic electricity needs of at least 97% of South African citizens through reliable and affordable electricity services by 2030. All technology options (grid/microgrid /standalone systems) shall be considered based on a cost-benefit analysis and with regards to local supply chains. South Africa’s Department of Electricity and Energy (DEE) is responsible for INEP implementation, including its action plan, while municipalities and the Development Bank of South Africa (DBSA) will act as implementing partners, and the South African National Energy Development Institute (SANEDI) as technical advisor. South Africa does not have a dedicated Electrification Agency. The establishment of a Project Management Office is currently underway, with further resource mobilisation required to finance operations.

The review of the six existing Provincial Electrification Master Plans (PEMPs)27F1 under the INEP action plan shows that provinces with lower levels of electrified households typically are more rural, often with geographically challenging conditions including difficult terrain, higher distance from existing infrastructure and low population density which is sparsely distributed – making grid connections costly to achieve and logistically challenging (Department of Electricity and Energy, 2025[1]).

Challenges in INEP implementation

Despite the significant electrification progress, rising demand for new electrification consistently outpaced the rollout of new connections, leading to persisting challenges linked to access to electricity, affordability and unplanned outages (Department of Electricity and Energy, 2025[1]). Unelectrified communities often face challenges due to a lack of formal land tenure, insufficient public space and facilities, as well as poor access to municipal services. Relying on unsafe fuels to cover basic energy needs further increases risks of injury, property damage and loss of life (PCC, 2024[17]).

Tight public budgets, as well as uncoordinated planning with municipalities, lengthy local procurement processes, capacity constraints and project management deficiencies are among the key challenges delaying implementation (Department of Electricity and Energy, 2025[1]). Non-technical grid losses28F2 and affordability challenges of low-income households regarding current electricity tariffs further compound these hurdles. The 2025 INEP Action Plan therefore places particular attention on ensuring affordability for low-income households, proposing possible subsidy models and various financing options.

The main funding for INEP implementation is a conditional grant allocation through the National Budget. Allocations from INEP grants are intended to fund the capital costs of providing electrical connections to poor households and providing the bulk infrastructure needed to ensure a stable electricity supply. Alternative sources of energy are considered in areas where grid connection is neither practical nor cost-effective (Statistics South Africa, 2024[2]).

Between 2020 and 2024, budget allocations and grid connection progress remained below target. On average 167 000 grid connections were achieved per year, which would need to almost double (amounting to approximately 300 000 grid connections per year) to achieve universal access by 2030 (Department of Electricity and Energy, 2025[1]). There are, however, variances per province and fiscal year. In fiscal year 2024/25, both Mpumalanga and Western Cape surpassed their planned connections target. In Mpumalanga, 10 141 connections (incl. rollovers) were achieved, 77% through Eskom’s electrification efforts and 23% through municipal electrification programmes. In the same year, Western Cape achieved 13 133 connections incl. rollovers, 54% through municipalities and 46% through ESKOM (Department of Electricity and Energy, 2025[1]). In 2025, ZAR 3.9 billion have been allocated through INEP to electrify currently unserved households, including ZAR 247 million for the national roll-out of SHS in remote and underserved indigent households (Department of Electricity and Energy, 2025[1]).

Based on current electrification progress, achieving universal access by 2030 would therefore require the mobilisation of additional capital and an acceleration of grid and non-grid electrification efforts. In 2025, the DEE indicated a total funding need of ZAR 75 billion to resolve the existing electrification backlog (Department of Electricity and Energy, 2025[1]) the majority of which would need to be mobilised from external sources in light of tight public budgets. The INEP Action Plan therefore proposes the development of innovative funding models aimed at mobilising investment from the private sector, international development banks, development partners and others to bridge the financing gap and ensure the long-term sustainability of electrification efforts.

A new study commissioned by the African Development Bank (AfDB) for the DEE under the Africa Minigrids Acceleration Programme (AMAP) and funded through the Sustainable Energy Fund for Africa (SEFA) shall identify the delivery model for off-grid electrification to be consequently applied under the INEP to close the existing funding gap and propose an operational implementation roadmap for 2026-2030 (AfDB, 2026). Results of this study are expected for July 2026.

Microgrid solutions under the INEP

The six existing provincial electrification masterplans of Gauteng, Eastern Cape, KwaZulu-Natal, Limpopo, Mpumalanga and North West provinces outline the electrification backlog in each province and across their municipalities, as well as areas suitable for off-grid electrification, including cost comparison with grid extensions. While the structure of the masterplans and considerations for off-grid systems vary, solar PV systems are consistently identified as priority technology option for off-grid electrification across all six plans. In Mpumalanga, for instance, backlogs are located throughout the province and are highest in metropolitan areas. Most backlogs are reported within existing settlements, representing informal settlements or private lands, although some are located far from the existing network. The municipality of eMalahleni within Nkangala District has the highest electrification backlog in Mpumalanga (almost 52 500 households in 2022), followed by Steve Tshwete municipality with around 46 000 unelectrified households. Mpumalanga’s masterplan almost exclusively considers 600 W entry-level solar PV systems for off-grid electrification, yet does not adequately plan for microgrid electrification. While each masterplan is structured into short-, medium and long-term plans for electrification rollout, considered timeframes vary. Mpumalanga’s masterplan, for instance, envisions full electrification at the latest by 2033, whereas Gauteng masterplan has a 15-year planning horizon until 2038. While taking into account local capacities for electrification rollout, this does not align with the accelerated rollout foreseen in the INEP action plan.

The INEP action plan foresees a combination of grid connections and decentralised solutions to electrify remaining households (Department of Electricity and Energy, 2025[1]). Decisions between grid connections and microgrid deployment will be based on a set of criteria, including distance to existing infrastructure, population density, geography and terrain, energy demand and cost per connection.

Microgrids would be prioritised in areas beyond 10-15 km distance from existing infrastructure, rural areas with lower population density and harder to access, challenging terrains, and where cost per connection for grid expansion exceeds a specific threshold (e.g. ZAR 70 000, with variances per province).

Considered microgrid solutions in the INEP Action Plan include:

• Type 1: Standalone, low-cost solutions for low-income households and remote areas, with basic service level and an average cost per connection of ZAR 35 000; this allows for lighting, phone charging and minimal appliance use.

• Type 2: Medium-cost alternating‑current (AC) microgrids for rural communities with moderate energy requirements like lighting, small refrigeration, TV and additional appliances at average cost per connection around ZAR 55 000;

• Type 3: Full microgrids for higher energy demand households and small businesses delivering comprehensive service levels to run large appliances and small-scale economic activities at an average cost per connection of ZAR 120 000; or

• Fully grid-tied electrification in urban and peri-urban areas for full electricity services and consistently high demand. Costs estimates per connection vary per province between ZAR 10 000 and ZAR 134 000, with an average of ZAR 57 000.

Type 3 microgrids or grid extensions would be considered for areas with higher energy demand from households, small businesses, schools and clinics, whereas Type 1 microgrids would serve to electrify low-demand households in remote communities, including indigent communities (Department of Electricity and Energy, 2025[1]).

Two pilot microgrids will be implemented in partnership with Huawei in Limpopo province to provide 475 households with 800W maximum power each and 24-hour battery storage backup, which could allow to draw important lessons for other provinces (Department of Electricity and Energy, 2025[1]).

While access to electricity would be achieved by all types of microgrids under South Africa’s definition, enabling PUE would require planning for Type-3 microgrids, where technically and financially reasonable. This could entail identifying suitable anchor clients in the community or close vicinity, identifying and supporting the emergence of small businesses, as well as sufficient household demand. Finally, the Action Plan calls for innovative funding models to attract investment from the private sector and development banks, ensuring the financial sustainability of the electrification programme.

Enabling environment for microgrid deployment in South Africa

Legal and regulatory framework

South Africa neither has an accepted definition for minigrids or microgrids, nor an established regulatory framework including licensing and tariff regime, as well as technical standards for service quality related to microgrid assets. While the INEP defines electrification targets, neither the INEP nor SAREM contain specific targets or exact plans for microgrid deployment, which could provide some investment certainty. Data on unelectrified communities, their socio-economic profile and geospatial data to inform the selection of promising sites for microgrid deployment is currently not easily publicly accessible and not available through a centralised platform.

Major regulatory transformations in South Africa’s electricity sector have, however, improved the enabling environment for microgrid deployment in recent years. The country is in a transition process from an integrated monopoly, where its state-owned and vertically integrated utility Eskom acted at the single buyer, towards full market liberalisation which enables distributed electricity generation.

Existing regulations were mostly designed for large-scale centralised power plants, lacking clear rules for grid access by microgrids and creating lengthy licensing approval processes (Granville Energy, 2025[6]).Neither the Electricity Regulation Act of 2003, nor the Licensing Exemption and Registration Notice No. 402 of January 2023 currently define microgrids as a licensable activity under South African law. Clarifying NERSA’s mandate for issuing microgrid licenses and advancing the current discussions on the design of a suitable microgrid regulatory framework will be important steps for their deployment, particularly in light of the need to mobilise private finance and investment. Recent regulatory changes, however, had positive implications for microgrid deployment, and particularly for grid-tied solutions.

An amendment to Schedule 2 of the Electricity Regulation Act (ERA) relaxed the licensing threshold for generators of distributed energy resources (DERs) to 100 MW in 2021. This significantly reduced bureaucratic hurdles and accelerated project implementation timelines, unlocking a pipeline of more than 80 projects (Granville Energy, 2025[6]). Previously, DER projects with a capacity above 1MW had to obtain a license from the National Energy Regulator of South Africa (NERSA), with a 120-day decision timeframe.

The 2023 adjustment removed the licensing requirement for generation facilities of all capacities, provided that they are connected to the transmission or distribution grid (i.e. embedded). This further accelerated implementation timeframes for embedded generation projects and aimed to promote private investment (Granville Energy, 2025[6]). Small-scale embedded generation (SSEG) systems under 100 kW still require registration with the utility (either Eskom or the municipality), which can be a cumbersome process. Grid-tied systems between 100kW and 100 MW nonetheless require registration with NERSA (Eskom, 2026[18]). While a Certificate of Compliance confirms that an SSEG installation such as a rooftop solar system meets electrical safety standards, registration ensures that such systems are connected safely and integrated responsibly into the electricity network. All registration and connection fees including a free smart meter29F3 are waived until 30 September 2026 for Eskom customer solar systems up to 50kVa (Eskom, 2026[18]), reducing overall system costs. However, many municipalities in Mpumalanga face significant capacity constraints and do not yet enable SSEG installations (Chapter 2). Isolated microgrids are not covered by these legal changes.

As a unique characteristic of South Africa’s electricity sector, municipalities have the authority to distribute electricity in their area of jurisdiction,30F4 subject to legislation and regulation by the national and provincial governments. The Municipal Systems Act (Act No. 32 of 2000) establishes municipalities as service authorities with responsibility for developing policies, drafting by-laws, setting tariffs and regulating the provision of services through by-laws and other mechanisms.

Electricity distribution is a major source of revenue for municipalities, as the Municipal Fiscal Powers and Functions Act allows municipalities to levy a surcharge on electricity tariffs, even if it is provided by Eskom (Statistics South Africa, 2024[2]). Third-party wheeling of energy is currently subject to the buyer being connected to a medium-voltage or higher-voltage network and being on a time-of-use tariff, and the generator being licensed/registered to generate and supply the network with electricity. While the regulatory removal of the licensing requirements for embedded generation per se would not exclude microgrids from participating in wheeling, it is currently not allowed for low-voltage connections of less than 1 kV – which are typical for many small rural or community microgrids (Eskom, 2026[19]).

The Electricity Regulation Amendment Act of 202431F5 (ERA) establishes a liberalised and diversified market by unbundling Eskom and creating the state-owned National Transmission System Company of South Africa (NTCSA) as independent system operator to ensure fair grid access. The act empowers private actors to participate freely and directly in electricity market transactions, and end-users to choose their electricity provider based on service quality, price and reliability, thereby fostering competition. These reforms eased previously existing barriers to market entry and grid access for microgrids and strengthened the regulatory framework for private investment (Granville Energy, 2025[6]). Microgrids are neither covered in the ERA or its amendments, nor in the licensing exemptions or registration notices issued by the then DMRE. This means that an enabling legislation, issued by the DEE, would be needed to empower NERSA to regulate the emerging microgrid industry in South Africa.

In December 2024, NERSA approved a net-billing framework, under which “prosumers”, meaning active energy consumers that both consume and produce electricity, are billed at the standard retail tariff for all electricity imported from the grid, while receiving a credit for electricity exported to the grid at a typically lower “export tariff”. Subject to NERSA’s approval and overarching principles of fairness and cost-reflectivity, municipal distributors can design specific tariffs and technical requirements (Lopile Tech, 2025[20]), which introduces implementation complexities and uncertainty for microgrid developers. While net-billing incentivises private investment in SSEG, it also incentivises the maximisation of on-site self-consumption, for instance through optimal battery storage systems. Revenues from electricity sales make up 30% or more of total municipal revenues in many cases (Lopile Tech, 2025[20]), so the rise of distributed renewable energy generation constitutes a thread to this financial utility model. The net-billing framework ensures that the fixed network and service charges are paid by all customers regardless of their consumption levels.

While recent regulatory reforms have improved the investment environment for renewable energy generation and microgrids, the absence of dedicated microgrid regulations continues to pose significant challenges. These include gaps in tariff design, grid encroachment frameworks, as well as uncertainty around complex and long licensing and permitting processes. The need for more coordinated planning and streamlined procurement processes was highlighted, particularly with regard to municipal electrification programmes (Department of Electricity and Energy, 2025[1]). A draft regulatory microgrid framework, tariff guidelines and contractual templates are currently being drafted to accelerate PPP procurement for microgrid projects. Updated provincial electrification master plans with geospatial data shall guide aligned planning processes and reduce uncertainty for investors (OECD, 2026[21]).

Major international initiatives and programmes supporting the deployment of mini-grids or microgrids, such as the AfDB and WB-led Mission 300 initiative or the Africa Mini-grids Programme (AMP), led by AfDB, UNDP and Rocky Mountain Institute, do not cover South Africa as a key target country. South Africa could, however, leverage lessons learned, tools and templates developed within these programmes and engage in government-to-government exchanges on strategic approaches and lessons learned in designing legal and regulatory frameworks for microgrids. The African Model Mini-Grid Regulations Toolkit, for instance, was developed by the African Forum for Utility Regulators (AFUR) in partnership with GET.transform to help governments and regulators develop, update and adapt their microgrid policies, regulations and tariff design in line with international best practices.

Key existing and future stakeholders for INEP implementation

The DEE has overall responsibility for implementing the INEP, supported by a range of implementing agents, including Eskom, municipalities and the DBSA, as well as other partners covering financing, regulation and capacity building (Figure A F.3). Under DEE leadership, these functions are carried out by a wide range of national and, increasingly, international stakeholders.

Figure A F.3. Key stakeholders for INEP implementation

Note: DBSA: Development Bank of South Africa; DEE: Department of Electricity and Energy; DHET: Department of Higher Education and Training; INEP: Integrated National Electrification Programme; SALGA: South African Local Government Association; TVET: technical and vocational education and training.

References

[11] AMP (2026), AMP and AFUR launch partnership to strengthen minigrid regulation across nine countries, https://africaminigrids.org/amp-and-afur-launch-partnership-to-strengthen-minigrid-regulation-across-nine-countries/.

[7] Carbon Trust (2017), Energy Access in South Africa: A toolkit for developing successful green mini-grids, https://www.cityenergy.org.za/uploads/resource_447.pdf.

[1] Department of Electricity and Energy (2025), PCEE Briefing: Integrated National Electrification Programme (INEP), https://sapvia.co.za/wp-content/uploads/2025/10/PCEE-INEP-Presentation-29-OCTOBER-2025.pdf.

[16] Department of Electricity and Energy (2025), South African Renewable Energy Masterplan (SAREM), https://www.gov.za/sites/default/files/gcis_document/202506/south-african-renewable-energy-masterplan.pdf.

[14] Department of Energy (2014), IEP Planning Report Workshop: Overview of Universal Energy Access Strategy, https://www.dmre.gov.za/Portals/0/Energy_Website/files/IEP/Polokwane/Overview-of-Universal-Energy-Access-Strategy.pdf.

[9] EEP Africa (2018), Opportunities and Challenges in the Mini-grid Sector in Africa: Lessons Learned from the EEP Portfolio, https://eepafrica.org/documents/EEP_MiniGrids_Study_DigitalVersion.pdf.

[13] Endev (2024), Sustainable Energy for Smallholder Farmers in Ethiopia, Kenya and Uganda, https://endev.info/countries/sustainable-energy-for-smallholder-farmers-in-ethiopia-kenya-and-uganda/.

[18] Eskom (2026), Eskom extends rooftop solar registration waiver by six months and advances prepaid residential option, https://www.eskom.co.za/eskom-extends-rooftop-solar-registration-fee-waiver-by-six-months-and-advances-prepaid-residential-option/#:~:text=%E2%80%9CThe%20extension%20means%20that%20all,to%2050kVA%2C%E2%80%9D%20concluded%20Mlambo.

[19] Eskom (2026), What you need to know about wheeling of electricity, https://www.eskom.co.za/distribution/tariffs-and-charges/wheeling/.

[6] Granville Energy (2025), South Africa’s Minigrid Revolution: Unpacking the Regulatory Adjustments that Unlocked Deployment, https://www.africamda.org/wp-content/uploads/2025/07/South-Africas-Minigrid-Revolution.pdf.pdf.

[5] IEA (2026), Glossary: Mini-grids and microgrids, https://www.iea.org/glossary#M.

[8] IEA (2025), Financing Electricity Access in Africa, IEA, https://www.iea.org/reports/financing-electricity-access-in-africa.

[4] iShack Project (2026), iShack Project, https://www.ishackproject.co.za/.

[10] Lemaire, X. (2025), “Anchor-based mini-grids: (Political) power beyond technology? The case of a mini-hydro scheme in Rural Zambia”, ENergy for Sustainable Development, Vol. 85, https://www.researchgate.net/publication/388069904_Anchor-based_mini-grids_Political_power_beyond_technology_The_case_of_a_mini-hydro_scheme_in_Rural_Zambia.

[20] Lopile Tech (2025), NERSA’s new net billing rules are a game-changer for South Africa’s energy landscape, https://www.lopiletech.co.za/post/nersa-s-new-net-billing-rules-are-a-game-changer-for-south-africa-s-energy-landscape.

[21] OECD (2026), Thematic Roundtable 4, https://www.oecd.org/content/dam/oecd/en/about/programmes/cefim/south-africa/DFFE-OECD%20Thematic%20Rountables%20February%202026.pdf.

[17] PCC (2024), Social Ownership Models in the Energy Transition, Presidential Climate Commission, https://www.climatecommission.org.za/publications/social-ownership-models-in-the-energy-transition.

[3] RMI (2025), Interconnected Mini-Grids: From Pilots to Powerhouses, https://africaminigrids.org/from-pilots-to-powerhouses/.

[12] RMI (2019), Rethinking Minigrid Design: Capturing Savings Through Capacity Utilisation, https://rmi.org/rethinking-minigrid-design-capturing-savings-through-capacity-utilization/.

[2] Statistics South Africa (2024), The state of basic service delivery in South Africa: Analysis of the Census 2022 data, Stats SA, https://www.statssa.gov.za/publications/Report-03-01-83/Report-03-01-832022.pdf.

[15] The Presidency, Republic of South Africa (2022), South Africa’s Just Energy Transition Investment Plan (JET IP) 2023-2027, https://justenergytransition.co.za/.

Notes

← 1.  Provincial Master Plans have been adopted by Limpopo, Eastern Cape, Gauteng, Mpumalanga, Kwazulu Natal and North West Provinces.

← 2.  Through theft, vandalism, illegal connections, meter by-pass and ghost vending.

← 3.  Up to ZAR 10 000 for urban/residential customers and ZAR 36 000 for rural customers.

← 4.  Stipulated in schedule 4B of the Constitution of 1996.

← 5.  Which amends the 2006 Electricity Regulation Act.