Lights, Arbitration, Action: South African perspectives on Africa’s energy transition

Africa finds itself at a defining moment - grappling with the need to meet soaring energy demand, uphold critical economic growth objectives, and adhere to global decarbonisation imperatives. Within this complex trifecta, arbitration has emerged as a pivotal mechanism for resolving disputes arising from energy transitions, particularly as countries revise legal and policy frameworks to support climate goals. 

No nation exemplifies this tension more vividly than South Africa - a country whose energy landscape reflects the broader challenges and opportunities of the continent, while offering key insights into arbitration's evolving role.

The African Energy Conundrum: Promise and Paradox

As of 2023, only 68% of Africa’s population had access to electricity, with vast disparities between countries. The continent, home to nearly 18% of the global population, accounts for just 2% of global electricity generation. 

This discrepancy underscores a fundamental reality: Africa’s energy transition must address energy poverty and development gaps while simultaneously embracing a decarbonised future.

Africa possesses immense renewable energy potential. It holds 60% of the world’s best solar resources yet contributes less than 2% to the global solar photovoltaic (PV) capacity. Wind and green hydrogen capacities are similarly underutilised. In 2022, Africa accounted for just 1% of global onshore wind capacity and less than 0.5% of green hydrogen production. These figures reflect the continent’s historically marginal role in global renewables investment, receiving just 2% over the past two decades. In 2021 alone, Africa attracted only USD 2.6 billion in renewables finance out of a global total of USD 434 billion.

Encouragingly, this trend is beginning to shift. Africa’s total renewable energy capacity stood at approximately 62 GW in 2023, with projections indicating a fivefold increase to 300 GW by 2030. Forecasts suggest that solar PV, onshore wind, and green hydrogen will reach 70 GW, 51 GW, and 50 GW respectively by 2035. 

The growth is not limited to traditional powerhouses like Egypt and South Africa. Large-scale projects in Morocco, Algeria, Ethiopia, Mauritania, and Namibia - including German-backed hydrogen initiatives - are expanding the continent’s renewable geography.

Infrastructure Investment and the Transmission Bottleneck

Despite its resource endowment, Africa’s energy transition is severely constrained by inadequate electricity transmission and distribution infrastructure. Between 2010 and 2020, transmission projects received just 0.5% of Africa’s total energy investment. Without modernised grids, even the most ambitious renewable energy projects risk becoming stranded assets. This infrastructural deficiency not only undermines energy access but also deters potential investors due to integration challenges and regulatory uncertainty.

South Africa’s Transition: A Case Study in Complexity

South Africa presents a microcosm of Africa’s broader transition challenges. The country remains heavily reliant on coal, which accounts for around 85% of electricity generation. Chronic underinvestment and operational failures at Eskom, the national utility, have resulted in widespread load-shedding, with over 300 days of power outages recorded in 2023.

To mitigate the crisis, South Africa has adopted a dual strategy: expanding renewable energy and securing international finance. A new credit guarantee vehicle is expected to launch in 2026 to de-risk grid investments, while more than ZAR 440 billion has been earmarked over the next decade for transmission infrastructure upgrades. The Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) has attracted investment, catalysed over 100 renewable energy projects, and injected significant capacity into the grid. However, it has also given rise to disputes concerning bid processes, pricing revisions, delays, and local content requirements. Recent government announcements around grid funding instruments may also serve as templates for future public-private participation, potentially reducing investor uncertainty and arbitration risk.

South Africa is also leading climate finance innovation through the Just Energy Transition Partnership (JETP), an USD 8.5 billion agreement with international partners, including the EU, UK, and US, to support the country’s coal-to-renewables transition. While the partnership signals progress, it may also trigger investor-state arbitrations, particularly where fossil fuel investors invoke investment protections or stabilisation clauses in response to accelerated decommissioning or regulatory reforms.

The Role of Arbitration in Energy Disputes

Arbitration has long been central to resolving energy disputes in Africa, particularly in oil, gas, and infrastructure projects. As the energy transition accelerates, arbitration is becoming increasingly relevant in renewable-related disputes.

The continent’s evolving “protean” regulatory environment, overlapping legal frameworks, emerging technologies, and shifting public-private dynamics generate fertile ground for conflict. As disputes around Power Purchase Agreements (PPAs), feed-in tariffs, and construction delays continue to rise, arbitration offers a confidential, neutral, and enforceable pathway for resolution.

South Africa once again offers a compelling example. In the Thabametsi coal plant case (Earthlife Africa Johannesburg v Minister of Environmental Affairs, where the courts halted a major coal project after ruling that its environmental impact assessment failed to consider climate risks) the intersection of domestic litigation and international arbitration became particularly clear. Investors may seek recourse under bilateral investment treaties (BITs) or contracts containing arbitration clauses where regulatory changes threaten the viability of their projects.

Paris Arbitration Week 2025: Key Insights

At Paris Arbitration Week 2025, the panel discussion titled "Energy Transition in Africa: Arbitration at the Crossroads of Sustainability and Development" spotlighted several emerging legal and commercial challenges. Legal experts highlighted that the transition requires the renegotiation of legacy contracts and the management of rising costs linked to new technologies and infrastructure needs. Such developments may activate change-in-law clauses, stabilisation provisions, or give rise to taxation-related disputes.

Panellists also addressed the emergence of green hydrogen as a game changer. While the focus was primarily on green hydrogen, it was noted that blue and grey hydrogen technologies continue to play a significant role in the broader energy mix, particularly in jurisdictions where full decarbonisation is being pursued incrementally. These alternative hydrogen pathways may offer transitional value and are likely to shape future infrastructure and arbitration considerations.

With surging demand in Europe and hydrogen’s potential to decarbonise heavy industry, Africa could become a major global exporter. However, this will necessitate cross-border infrastructure, supply chain integration, and complex contractual agreements; all of which are likely to give rise to high-stakes arbitrations.

It was emphasised that while arbitration is well-suited to commercial disputes - such as those relating to mergers and acquisitions or joint ventures - it may be less appropriate for disputes of a deeply public nature, such as those involving constitutional or community rights. In such instances, litigation or hybrid mechanisms may be more appropriate.

Strategic Recommendations: Enhancing Arbitration’s Role in Africa’s Transition

Drawing on insights from South Africa’s experience, the following recommendations are key:

• Develop clear and predictable regulatory frameworks: Governments must provide legal certainty through well-defined energy policies, consistent application of regulations, and transparent decision-making processes.

• Invest in local arbitration capacity: Strengthening institutions such as the Arbitration Foundation of Southern Africa (AFSA), and similar bodies across the continent, is essential. Local arbitration reduces costs, fosters trust, and ensures cultural and jurisdictional relevance.

• Promote capacity building and specialisation: Governments, bar associations, and academic institutions must invest in training arbitrators, judges, and practitioners in energy law, investment protection, ESG factors, and cross-border dispute resolution.

• Prioritise social equity in dispute resolution: Arbitration must evolve to reflect the imperatives of a just transition. Dispute resolution processes should be inclusive, consider community impacts, and advance environmental justice.

• Leverage international collaboration: Africa can benefit from partnerships with established arbitral centres and legal frameworks. Knowledge transfer, technical support, and legal harmonisation can enhance the credibility and effectiveness of arbitral regimes across the continent.

Arbitration as a Bridge, Not a Battlefield

Africa’s energy transition is not merely a technological challenge; it is a legal, commercial, and socio-political transformation. As the continent seeks to light up homes, power industries, and meet climate targets, disputes are inevitable. When strategically deployed, arbitration can serve as a bridge between investor confidence and public interest, and between national policy and international obligations.

South Africa’s energy narrative - characterised by regulatory reform, international financing, grassroots resistance, and institutional evolution - offers a lens into what the future of arbitration in Africa may look like. With the right investment in infrastructure, legal capacity, and inclusive frameworks, arbitration can help write the script for a greener, fairer, and more resilient energy future.