Eskom's Curtailment Framework Is Now Approved: What the New Grid-Balancing Mechanism Means for C&I Solar and BESS Asset Owners Facing Forced Output Cuts

The Framework Is Live — Here's What It Actually Means on the Ground

For anyone who has watched a budget quote application sit in limbo because Eskom's grid showed zero remaining capacity, the news from April 2025 was significant. On 29 April 2025, the National Energy Regulator of South Africa (NERSA) approved the National Transmission Company South Africa's (NTCSA's) application for congestion curtailment to be classified as a constrained generation ancillary service. The implications for commercial and industrial (C&I) solar and battery energy storage system (BESS) asset owners are real, immediate, and demand careful financial modelling before you sign your next grid connection agreement.

At SolarXgen, we have been tracking this framework since the original GCCA 2025 Addendum was floated. Here is our field-level breakdown of what the approved mechanism actually means for your assets.

Why the Grid Reached Breaking Point

The Generation Connection Capacity Assessment (GCCA) 2025 highlights a stark reality: the "Cape Corridor" — Northern, Western, and Eastern Cape Provinces — which holds the country's best solar and wind resources, is thermally saturated with 0 MW of traditional capacity available. This wasn't a planning surprise; it was the logical outcome of rapid renewable energy uptake outpacing grid investment. Installed capacity in South Africa now exceeds 10.2 GW, making it the continental leader for installed capacity and securing its place among the top 20 solar PV markets globally.

The congestion problem has also created knock-on effects in procurement. Between late 2024 and the end of 2025, bid window 7 awarded a total of 3,940 MW of solar PV capacity — notably, the window was defined exclusively by solar successes, as grid constraints in traditional resource areas limited the diversification to other renewable energy technologies. Wind, the resource most abundant in the saturated capes, was effectively locked out.

The NERSA Approval: Key Parameters

The approval is valid from 1 April 2025 to 31 March 2028, after which it will be reviewed. This three-year window corresponds exactly to the MYPD6 tariff cycle. The most important number for C&I and IPP asset owners to internalise is the curtailment cap.

NERSA's approval is more restrictive compared to what was originally sought. The approval's validity runs from 1 April 2025 to 31 March 2028, and congestion curtailment as an ancillary service is limited to a 4% cap — applicable only in the Western Cape and Eastern Cape. This translates into approximately 1,580 MW of additional grid capacity across the Western Cape (1,180 MW) and Eastern Cape (400 MW).

Context matters here: the original GCCA 2025 Addendum had modelled a 10% curtailment cap to unlock as much as 3,470 MW. NERSA's approval is, however, more restrictive than what was sought in the original application. The politically and financially more conservative 4% ceiling protects existing generator revenue streams but delivers a smaller capacity unlock than developers originally hoped for.

Who Is Eligible — And Who Is Not

This is where the practical complexity begins. The Practice Note ties curtailment capacity allocation to existing Eskom processes (cost estimate letter/budget quote (CEL/BQ) issuance and the Interim Grid Capacity Allocation Rules (IGCAR) regime) and sets clear eligibility criteria: projects at new application, awaiting CEL, in the IGCAR evaluation stage, or allocated with provisional capacity may participate, whereas projects with valid or effective BQs are generally excluded because they are already embedded in upstream planning assumptions.

For C&I developers, the practical read is this: if you already hold a valid budget quote, you are protected from the curtailment mechanism being applied to you — but you also cannot use it to unlock additional capacity. If you are applying fresh or are mid-queue, your connection will likely be issued with curtailment terms baked in. All customers (save for those holding valid or effective BQs) may apply and will receive CELs reflecting curtailment terms, with congestion curtailment capacity reserved after passing IGCAR assessment.

The Implementation Timeline: What Comes Next

The approval is live, but the operational machinery is still being assembled. Key milestones for the implementation of this mechanism include the publication of the revised GCCA Addendum on 31 October 2025, the finalisation of financial and operational curtailment procedures by 31 March 2026, and the implementation of the automatic curtailment system by 31 October 2026.

We are now past the 31 March 2026 milestone. The financial and operational curtailment procedures have been finalised, and the industry is now in the critical six-month window leading to the automated curtailment system going live. For C&I and BESS asset owners connected in the Western Cape and Eastern Cape, this means the infrastructure to actually execute curtailment instructions will be operational before year-end 2026. If you are not modelling for curtailment dispatch events now, you are behind.

The Compensation Question: "Deemed Energy" and Revenue Protection

One of the most contested questions in our client advisory practice has been: will we be paid when our plant is curtailed? The short answer is yes — within limits.

IPPs are entitled to receive deemed energy payments during a system event which includes a period of curtailment. The net effect is revenue loss arising from curtailment up to the 10% threshold, but a grid unavailability period for other system events is no longer applicable. The compensation mechanism is structured as an ancillary service payment — it acknowledges that curtailment is a system-operator instruction, not a plant fault. Curtailment compensation is limited to the 2025–2028 pilot period.

However, C&I operators holding bilateral PPAs — rather than government REIPPPP power purchase agreements — face a more complex picture. Deemed energy clauses in standard C&I PPA templates were not uniformly drafted to accommodate network-operator-instructed curtailment as opposed to Eskom distribution grid outages. SolarXgen strongly recommends a legal review of all active and pipeline PPA agreements in the Western Cape and Eastern Cape to assess curtailment risk allocation before the October 2026 automated system goes live.

What This Means for BESS Asset Owners Specifically

For BESS-coupled solar projects, the curtailment framework creates both a risk and a structural opportunity that deserve separate treatment.

The Risk: A curtailment instruction under this framework targets the generating facility's output. If your BESS is co-located and shares a point of connection, curtailment instructions may apply to the combined system's export profile, not just the solar array. The Practice Note's technical scope on this point is still being tested in the field.

The Opportunity: Curtailment events during periods of grid congestion are, by definition, periods of high renewable generation and — increasingly — periods of declining spot prices. The "Duck Curve" — a midday surplus of solar power — will become a standard feature of the South African grid. This creates a massive arbitrage opportunity for Battery Energy Storage Systems (BESS), which can charge at near-zero prices at noon and discharge during the lucrative evening peak.

A BESS system that absorbs curtailed energy (reducing the effective curtailment impact on revenue) and then dispatches during the peak window is not merely a grid asset — it is a curtailment hedge. South Africa's IRP 2025 targets 8,500 MW of additional battery energy storage system (BESS) capacity by 2039, as energy storage capacity is critical to managing the intermittency of renewables and reducing reliance on fossil-fuel-based peaking plants. The regulatory direction is unambiguous: storage assets will be rewarded for exactly this kind of flexibility.

The Broader Market Context: Tariffs, Transmission, and Transition

The curtailment framework does not exist in isolation. From 1 April 2025, Eskom implemented a 12.74% electricity tariff increase for direct customers, with municipalities seeing an 11.32% rise from 1 July 2025. Rising tariffs increase the value of self-generated solar, making C&I projects more financially attractive — but they also increase the stakes when curtailment cuts into generation hours.

Meanwhile, the broader market is in structural reform. The Electricity Regulation Amendment Act 38 of 2024 came into force on 1 January 2025 after being enacted in August 2024. The act provides for an open multi-market system combining competitive, bilateral and regulated transactions, and requires the establishment of a fully independent TSO within five years. The state's inability to fund the R440 billion (US$28 billion) required for 14,500 km of new transmission lines creates an opportunity for private capital through the Independent Transmission Project (ITP) programme.

Until that transmission build-out materialises, curtailment is the bridge. The immediate priority remains to use curtailment strictly as a bridge — the only path that preserves the framework's least-cost character for end users, sustains market confidence, and reduces curtailment dependence on schedule.

SolarXgen's Field Recommendations for C&I and BESS Asset Owners

• Audit your grid connection documentation now. Determine whether you hold a valid BQ (excluded from curtailment) or whether your connection will be issued under the new framework.
• Review your PPA curtailment clauses. Standard bilateral C&I PPA templates require updating to properly allocate deemed energy risk under the NERSA-approved ancillary service mechanism.
• Model the 4% curtailment ceiling into your P50/P90 financial projections. For most Western Cape solar assets operating at 25–30% capacity factor, a 4% curtailment cap represents a manageable but material revenue variance — especially compounded over the MYPD6 period.
• Size your BESS for curtailment absorption. Projects in the Eastern and Western Cape should now design BESS capacity to absorb peak midday curtailment windows, converting a regulatory constraint into a dispatchable revenue stream.
• Watch the October 2026 automated curtailment system go-live date. This is the operational trigger point. Projects commissioned after this date in the constrained regions will be subject to real-time NTCSA dispatch instructions.
• Consider geographic diversification for new pipeline projects. Many developers have now started planning for curtailment scenarios and pivoted to other provinces like Mpumalanga and KwaZulu-Natal, where the decommissioning of coal plants will free up grid space. This geographic shift is likely to reshape the spatial economics of renewable development over the next five years.

Bottom Line

Eskom's congestion curtailment framework is not a threat to the C&I solar sector — it is a pragmatic, time-limited mechanism that unlocks grid access that would otherwise remain locked for years while transmission infrastructure catches up. The 4% cap is financially manageable. The compensation framework, while pilot-period limited, provides a revenue floor. And the BESS opportunity embedded within curtailment events is material.

But the window for preparation is closing. Severe curtailment in the Eastern Cape and other regions is projected until new substations are operational. Asset owners who re-model now, re-draft their PPAs now, and size their storage correctly now will be ahead of the curve when the automated system activates before December 2026. Those who don't will be learning the hard way — one curtailment dispatch event at a time.