SAWEM-SAPP Integration and the Commercial Viability of Mozambique Gas-to-Power Exports

Abstract

South Africa’s planned wholesale electricity market (SAWEM) will couple with the Southern African Power Pool (SAPP) day-ahead market through an implicit price mechanism, fundamentally altering the competitive landscape for Mozambican gas-fired generators targeting regional exports. This brief uses a stochastic modelling framework calibrated to historical SAPP market data and South Africa’s merit order to quantify the impact across four scenarios from 2026 to 2035. The central finding is that SAWEM integration compresses spark spreads by 21–27% under normal conditions by exposing Mozambican generators to South Africa’s low-cost coal fleet (SRMC ~$30/MWh), legacy renewable PPAs, and expanding battery storage. However, the expiry of the Cahora Bassa PPA in 2030 and persistent regional supply deficits prevent exclusion from the market. Bankability hinges on securing long-term bilateral offtake agreements, accessing domestic-priced gas below $3/GJ, and transmission expansion to overcome the constraint that blocked 72% of matched SAPP trades in November 2025.