- Meridian says Eskom’s draft SO₂ dispatch strategy fails to meet key legal design and analytical requirements under the Minister’s 2025 MES exemption decision.
- The draft is characterised as a modelling exercise rather than a workable implementation design for an SO₂ pricing mechanism.
- Recommendation calls for rejection of the report and resubmission with full compliance to regulatory conditions and expert input.
Meridian Economics has submitted formal comments on Eskom’s draft Emission Dispatch Prioritisation Strategy, concluding that the utility has not met the requirements of the sulphur dioxide SO₂ pricing condition attached to the Minister of Forestry, Fisheries and the Environment’s 2025 Minimum Emission Standards exemption decision.
The draft strategy, published in March 2026 for stakeholder consultation, was intended to demonstrate how an SO₂ emissions price could be incorporated into Eskom’s dispatch decision making framework over time. According to Meridian, the obligation was not merely to test short term impacts but to develop a structured design pathway through which SO₂ pricing could progressively influence dispatch outcomes in line with system evolution.
Meridian argues that the submission falls materially short of this requirement, stating that Eskom has largely produced a modelling exercise rather than a design proposal. The modelling assesses scenarios in which an SO₂ cost is applied to coal fired generation and concludes that emissions reductions over the 2027 to 2031 horizon would be limited while system costs would rise. Meridian notes that such a finding was already anticipated in the Minister’s decision framework and does not address the core requirement to define how the mechanism should function and evolve over time.
The SO₂ pricing condition forms part of the broader exemption decision issued under Section 59 of the National Environmental Management Air Quality Act, which granted limited continued operation of several coal fired stations including Duvha, Kendal, Lethabo, Majuba, Matimba, Matla, Medupi and Tutuka. The decision was framed against Eskom’s long standing non compliance with minimum emission standards and recognised the technical and economic constraints associated with achieving sulphur dioxide compliance through retrofit solutions. It also emphasised that continued exemptions would only be justified if accompanied by robust conditions aimed at progressively reducing emissions intensity and coal burn.
At the centre of the dispute is the requirement for Eskom to investigate how a price expressed in R per kilogram of SO₂ could be integrated into dispatch prioritisation decisions, with the objective of shifting the merit order over time in favour of lower impact generation. Meridian highlights that the Minister’s decision explicitly set out detailed analytical requirements, including consideration of governance arrangements, implementation pathways within Eskom’s internal systems, and alignment with evolving electricity market structures.
Meridian’s assessment finds that Eskom’s draft does not adequately address several of these requirements. These include how the pricing mechanism would transition from a notional internal signal to a real cost instrument, how revenue flows would be structured or ring fenced, how the mechanism would interact with existing dispatch and planning processes, and how it would evolve alongside broader market reforms. The submission also does not clearly define institutional responsibilities for applying the SO₂ price signal within system operator or internal Eskom decision making processes.
The report further notes that Eskom does not provide a starting price level, escalation pathway, or detailed mechanism design. Instead, it presents a high-level alternative of a cap-and-trade style approach without sufficient operational detail to support implementation. According to Meridian, this omission is central, as the Minister’s condition explicitly requires the development of a concrete design or set of design alternatives.
Meridian also critiques the temporal framing of Eskom’s modelling, arguing that it focuses on a period in which the Minister had already acknowledged that SO₂ pricing would have limited immediate impact due to constrained system flexibility. The decision, it notes, envisages increasing effectiveness of the pricing mechanism over time as renewable capacity expands and system constraints ease, a trajectory not reflected in Eskom’s analytical approach.
On this basis, Meridian concludes that Eskom has only partially addressed one element of the multi part condition while failing to meet the broader analytical and design obligations. The organisation recommends that the Minister reject the draft strategy in its current form and require Eskom to revise and resubmit a fully compliant proposal.
Meridian further recommends continued use of independent expert input, potentially through the National Environmental Consultative and Advisory Forum mechanism, to support assessment of Eskom’s compliance and to inform the broader regulatory reform process relating to sulphur dioxide emissions in South Africa’s power sector.
Link to Meridian’s formal comments on Eskom’s draft Emission Dispatch Prioritisation Strategy HERE
Author: Bryan Groenendaal
