South Africa isn’t the first nation to break up an energy monopoly, and we certainly won’t be the last.
From the United Kingdom to Vietnam, the shift from a “single-buyer” model to a competitive wholesale market is a well-trodden path. While every country faces its own unique hurdles, these international precedents offer a clear roadmap – highlighting both the pitfalls to avoid and the massive economic opportunities that a liberalised market can unlock.
The UK Model: The pioneer of competition
In the early 1990s, the United Kingdom undertook one of the world’s most comprehensive energy reforms. They unbundled their state-owned utility into separate generation, transmission, and distribution companies- much like South Africa is currently doing with the establishment of the National Transmission Company South Africa (NTCSA).
The result? The UK saw a rapid surge in efficiency and a diversification of its energy mix. By allowing private players to compete, the market naturally incentivised lower-cost technologies. For South African businesses, the UK precedent proves that transparency in pricing and the ability to choose your own supplier aren’t just theoretical benefits; they are proven drivers of economic resilience.
Vietnam: The emerging market success story
Closer to our own economic context, Vietnam’s transition provides a fascinating parallel. To meet surging industrial demand, the country established the Vietnam Wholesale Electricity Market (VWEM). By opening the generation sector to private players and moving toward a market-based pricing system, Vietnam transformed its energy landscape.
The economic impact of this liberalisation has been monumental:
- World-Record Capital Injection: By creating a transparent framework for private capital, Vietnam attracted over $37 billion in power sector investment between 2010 and 2021.
- Unprecedented Renewable Growth: The competitive market unlocked the fastest annual proportional increase in wind and solar capacity ever recorded globally, exploding from virtually zero in 2018 to over 21 GW within just three years.
- Industrial Empowerment: Today, private and independent power producers account for more than 41% of Vietnam’s total installed capacity, reducing the financial burden on the state utility while providing the reliable, green power required to fuel the nation’s rapid GDP growth.
Vietnam’s journey shows that a “managed transition” allows the state grid infrastructure to remain secure while the private sector provides the billions in capital and operational agility needed to build new capacity quickly.
Common threads: What happens next?
When we look at successful liberalisations globally, three consistent themes emerge:
- Lowering the barrier to entry: Competition forces innovation. When new generators can enter the market easily, technology costs drop, and service levels rise.
- The rise of the ‘prosumer’: In liberalised markets, customers aren’t just passive buyers. They become active participants who can sell excess power back to the grid or adjust their usage based on real-time price signals.
- Specialised trading expertise: As markets become more complex, the role of the ‘trader’ becomes essential. Global precedents show that businesses thrive when they partner with entities that can navigate price volatility and manage risk across a multi-market system.
The South African context
South Africa is in the fortunate position of being able to learn from these global successes. We are moving toward a hybrid model that respects our unique grid constraints while embracing the ‘intelligent agility’ and private sector investment models that have defined successful markets elsewhere.
By looking at these international blueprints, we can see that while the transition requires careful management, the destination is a more stable, affordable, and sustainable energy future for everyone.
Future-proof your energy strategy with a partner who understands the global roadmap. Contact EXSA today to see how our market-ready solutions can help you navigate a changing energy market.