Hiring a commercial leader for South Africa’s wholesale electricity market

South Africa is preparing to open a wholesale electricity market. For larger power plants that sell to private buyers, the proposed rules add a new daily task: telling the market operator how much electricity the plant expects to produce in each hour of the next day. If the plant then produces more or less, it can face a penalty. A producer can take on this task itself or appoint a partner to do it. That choice changes the job of your senior commercial leader, so it is worth making before you write the job description.

Which producers are affected

Under the market operator’s proposed rules, the daily schedule covers every plant of 10MW or more that is licensed or registered with the regulator. It applies whether or not the owner also trades in the market. Plants contracted under the government’s procurement programmes are treated differently, because the Central Purchasing Agency is set to take over both their agreements and their schedules, according to the regulator’s consultation on wholesale pricing. The task therefore applies to producers that sell to private buyers and to plants whose output is not yet under contract.

Two routes, two different senior roles

The company that sends the daily schedule, and pays for any difference from it, has a formal name in the proposed rules: the balance responsible party. A producer can register for that role itself or appoint a partner, such as a licensed electricity trader, to take it on.

If the producer takes on the role itself, its commercial leader is accountable for the daily schedule and the cost of forecasting errors. If the business also trades, the leader handles the bids and the credit cover that trading requires. The job then includes managing daily financial exposure, with forecasting tools and a team trained to use them.

If the producer names a partner, the partner is accountable to the market operator for the schedule. The agreement between them sets how the cost of forecasting errors is priced and shared. The commercial leader’s job is to choose the partner, negotiate those terms and check that the partner delivers them.

The better route depends on the portfolio and on how much market exposure the owners will accept.

Agreements with buyers become part of the role

The market raises a new question for every agreement with a private buyer: who pays when output differs from the schedule? A partner at law firm Bowmans expected many of these agreements to be revised to include forecasting obligations. She also reported that some parties were considering how to share penalties between generator and buyer.

For a producer with several buyers, that can mean a separate negotiation with each one. The person leading those negotiations has to protect each long-term buyer relationship. They also have to assess how much of the balancing cost the agreed terms leave with the producer. The job description needs to include both.

Writing a job description that matches the decision

Winning and managing long-term agreements with buyers is a different responsibility from running an hourly schedule and its costs. A producer can combine the two in one senior role, split them across two roles, or keep a commercial role and add oversight of a trading partner. Whichever it chooses, the job description should state which decisions the role owns and which it only oversees.

People who take part in the market directly should first complete the market operator’s SAWEM School training and be certified. If the person you hire will take part in the market on your behalf, list that certification as a requirement in the job description.

If you are defining a commercial or trading role for this market, we would be glad to share our perspective on it.