Private renewable energy producers that wheel power – selling it directly to data centres and other large users and delivering it over the grid – have no regulated compensation if the grid operator switches them off because of oversupply.

That gap has not cost them yet: as far as the South African Photovoltaic Industry Association (Sapvia) is aware, this year’s more than tenfold rise in curtailment instructions has fallen entirely on state-procured projects.

Sapvia said in July that curtailment instructions to independent power producers (IPPs) had risen “from roughly 100 a month earlier this year to more than a thousand a month”.

Asked how many of those affected privately contracted or wheeling projects, Simphiwe Khuluse, Sapvia’s technical and policy manager, told TechCentral: “As far as we are aware, all of these curtailment instructions affected section 34 (state-procured) projects. None of them applied to private off-take or wheeling generation.” Sapvia represents the solar industry, so its view may not extend to wind farms.

“We had a particularly bad time during winter 2026, where we’ve seen curtailment of up to 3GW in a particular day,” Gav Hurford, acting GM of the National Transmission Company South Africa (NTCSA) system operator, said last week.

He was speaking as energy minister Kgosientsho Ramokgopa announced a proposed determination for 4.6GW of battery storage and 5GW of gas-to-power. The batteries are meant to charge from electricity that would otherwise be curtailed.

Two classes of producer

State-procured producers are compensated when told to stop, through deemed energy payments for the power they could have generated. In its reasons for decision on an NTCSA curtailment application in 2025, the energy regulator noted that “section 34 IPPs are paid deemed energy payments for curtailed energy by the NTCSA”, but that private generators did not receive this compensation.

“Instead, the risks and costs associated with lost production due to curtailment are addressed in contracts between private generators and their energy off-takers,” it said.

That decision gave private producers some cover, but only for curtailment caused by grid congestion. Under the mechanism NTCSA proposed and Nersa approved, “the off-taker’s account will be credited with the curtailed energy as if the IPP had supplied it”. The approval runs from 1 April 2025 to 31 March 2028, and the mechanism may only be used to connect additional generation capacity in the Eastern Cape and Western Cape.

It excludes “curtailment resulting from oversupply”. For that, the regulator lists the compensation method for private producers as “buyer or as per bilateral PPA” – that is, the buyer, or whatever the bilateral power purchase agreement (PPA) provides.

NTCSA has said curtailment is “driven either by network constraints that limit power transmission, or during periods where total electricity supply exceeds demand, particularly during low demand periods such as midday”. It has not said how this year’s instructions divide between the two causes.

Khuluse said IPPs operating under private PPAs “do not have a contractual mechanism for deemed energy payments”.

“For private wheeling deals, the supply contract and applicable compensation framework determine who carries the cost,” said Matthew Cruise, energy analyst and senior business developer at Jaltech and a management committee member of the South African Independent Power Producers Association.

Even compensated producers have felt the strain. Claims undergoing verification and settlement stood at about R2-billion in mid-June and had fallen to R1.5-billion by 24 July, a figure that included new claims received since 14 June, according to NTCSA. It said processing returned to normal operating levels on 31 August.

“For IPPs, reduced production and delayed compensation put pressure on cash flow while debt repayments and operating costs continue,” Cruise said.

Down to the contract

Robert Marston, data centre director at NTT Data South Africa, said: “NTT Data has not been directly impacted by grid curtailment this year. However, who carries the financial cost when renewable generation is curtailed depends on the terms negotiated between the IPP and the data centre operator. Depending on the agreement, the cost may fall to either party or be shared between them.”

“Private IPP agreements need to account for potential curtailment, as well as changes to tariffs, regulations and other factors that could affect the commercial viability of the arrangement. Ultimately, both parties need sufficient protection: data centre operators require predictable energy costs, while IPPs need certainty around the returns on their investment.”

Should oversupply curtailment reach private projects, data centres would feel it in their wheeling credits – the renewable energy credited against their consumption.

“If an affected IPP supplies a data centre through wheeling, less renewable electricity is available to credit against its consumption, unless the IPP supplier provides replacement generation,” Cruise said. The data centre still draws grid power, but a smaller wheeling credit “reduces savings and renewable coverage”.

Cruise, whose firm finances battery systems, said on-site batteries are one potential solution.

“Behind-the-meter batteries improve the off-take profile of a data centre or business by allowing it to absorb more renewable electricity when it is available, increasing the amount of renewable electricity it can contract,” he said. They also cut consumption during expensive peak tariff periods and lower billed peak demand charges, which are based on a site’s highest power draw, measured in kilovolt-amperes.

He was clear about the limits: “Batteries cannot recover electricity curtailed at the generator, but they can improve the value of the available energy.”