If you have started exploring renewable energy procurement for your business, you have almost certainly encountered two terms that appear together but are not the same thing: a Power Purchase Agreement (PPA) and a wheeling agreement. Both are essential to how wheeled energy works in South Africa — but they serve very different purposes, involve different parties, and carry different commercial and legal implications.
Confusing the two is common, and understandably so. They operate in parallel, and in many transactions they are discussed together as part of a single energy procurement process. However, understanding what each document does — and what each one does not cover — is essential before your business commits to any renewable energy contract.
This guide explains both contract types in plain terms, highlights the key differences, and clarifies how they interact in a typical wheeled energy transaction. For a broader introduction to how wheeled energy works, visit the SOLINK Energy Brokers Market Review.
What Is a Power Purchase Agreement (PPA)?
A Power Purchase Agreement is a long-term commercial contract between an energy buyer (the offtaker) and an energy generator (the Independent Power Producer, or IPP). It is the foundational document in any private renewable energy transaction, and it governs the commercial relationship between the two parties.
In simple terms, the PPA answers the question: on what terms will the offtaker buy electricity from the IPP?
What a PPA Typically Covers
- The agreed electricity tariff (cents per kWh) and how it escalates over time
- The volume of energy to be supplied — either a fixed amount or based on the generator’s output
- The contract duration — typically between 10 and 20 years for wheeled energy transactions
- Technology type: solar PV, wind, battery energy storage (BESS), or a combination
- Deemed energy provisions — what happens commercially if the IPP fails to deliver
- Renewable Energy Certificates (RECs) — who holds them and how they are reported
- Termination clauses, change-in-law provisions, and force majeure conditions
The PPA is a bilateral agreement — it exists between the IPP and the offtaker only. Eskom is not a party to it. Its primary function is to establish a bankable, enforceable commercial relationship that gives the IPP the revenue certainty needed to finance and build the project, and the offtaker the price certainty they need for financial planning.
| Important: The PPA Does Not Move Electricity A Power Purchase Agreement establishes the commercial terms of an energy sale — but it does not, by itself, physically deliver electricity to your premises. The mechanism that moves the electricity through the grid is governed separately by a wheeling agreement. Both documents are required for a wheeled energy transaction to function. |
What Is a Wheeling Agreement?
A wheeling agreement is the formal arrangement that governs how privately generated electricity is transmitted through Eskom’s national grid from the IPP’s generation facility to the offtaker’s site. Where the PPA covers the commercial relationship between buyer and seller, the wheeling agreement covers the logistics of how the electricity physically moves.
In South Africa, wheeling transactions are facilitated by Eskom through its Wheeling Energy Purchase System (WEPS). This platform tracks energy injected into the grid by the IPP and applies a corresponding credit to the offtaker’s electricity account on a Monthly Time of Use basis.
What a Wheeling Agreement Typically Covers
- The permitted use of Eskom’s transmission and distribution infrastructure
- The wheeling tariff charged by Eskom — approximately 3 cents per kWh to the generator and 14 cents per kWh to the offtaker
- Network loss factors — a small percentage of energy is lost in transmission and must be accounted for
- Metering, reconciliation, and billing processes through WEPS
- The connection points — where the IPP injects energy and where the offtaker receives the credit
- Duration and termination conditions aligned with the underlying PPA
Unlike the PPA, the wheeling agreement is not purely bilateral. Eskom, as the grid operator, is a central participant — either as a direct party to the agreement or as the regulating authority whose NERSA-approved tariff structure and technical requirements govern the transaction.
| Wheeling Fees Are Already Factored In A common concern from businesses new to wheeled energy is that Eskom’s wheeling fees will add cost on top of the PPA tariff. In practice, a well-structured wheeled energy business case — like those SOLINK Energy Brokers prepares for every transaction — incorporates all wheeling fees upfront. The net tariff presented to the offtaker already accounts for Eskom’s charges, so there are no hidden costs. |
PPA vs Wheeling Agreement: Key Differences at a Glance
The table below summarises the core differences between a Power Purchase Agreement and a wheeling agreement in the context of a South African renewable energy transaction.
| Aspect | Power Purchase Agreement (PPA) | Wheeling Agreement |
| Purpose | Sets the commercial terms of the energy sale between IPP and offtaker | Governs use of the grid to physically deliver energy from IPP to offtaker |
| Parties involved | IPP and offtaker (bilateral) | IPP, offtaker, and Eskom (as grid operator) |
| What it governs | Tariff, volume, contract duration, RECs, deemed energy, termination | Wheeling tariff, network losses, metering, WEPS reconciliation, connection points |
| Who sets the terms | Negotiated between IPP and offtaker (with broker support) | Eskom’s framework — governed by NERSA-approved tariff structures |
| Contract length | Typically 10–20 years | Aligned to the duration of the underlying PPA |
| Cost to offtaker | Agreed energy tariff (cents/kWh) — no additional broker fees via SOLINK | ~14 cents/kWh WEPS rebate adjustment (factored into PPA pricing) |
| Includes RECs? | Yes — issued to the offtaker throughout the contract term | No — REC issuance is governed by the PPA, not the wheeling agreement |
How the PPA and Wheeling Agreement Work Together
In a wheeled energy transaction, the PPA and wheeling agreement are complementary — neither is sufficient without the other. Here is how they interact in practice:
- The PPA is signed first, establishing the commercial relationship and confirming the offtaker’s commitment to purchase energy from the IPP.
- The wheeling agreement is then put in place to enable Eskom to facilitate the energy transfer — often as part of the same procurement process.
- Once both are in place, the IPP generates electricity, feeds it into the grid, and the offtaker begins receiving monthly credits through WEPS against their Eskom bill.
- SOLINK Energy Brokers manages both the commercial negotiations underpinning the PPA and the technical coordination required for the wheeling arrangement — including supplier vetting, term negotiation, and operational support post-signature.
For businesses considering wheeled energy, it is important to work with advisors who understand both sides of the equation. A favourable PPA tariff means little if the wheeling arrangement is not properly structured — and vice versa. Explore our brokerage services to understand how SOLINK handles both.
Frequently Asked Questions
Do I need both a PPA and a wheeling agreement to access wheeled energy?
Yes. A Power Purchase Agreement establishes the commercial terms under which you buy electricity from an IPP. The wheeling agreement enables that electricity to be delivered to you through Eskom’s grid. Both documents are required for a wheeled energy transaction to function — one without the other is insufficient.
Who negotiates the PPA on behalf of the offtaker?
In most commercial transactions, an energy broker like SOLINK Energy Brokers negotiates PPA terms on the offtaker’s behalf. SOLINK’s fees are agreed with IPPs in advance and factored into PPA pricing — meaning the offtaker pays no additional brokerage charge, while still benefiting from expert commercial representation and full supplier vetting.
Can the tariff in a PPA change over time?
Yes. Most PPAs include an annual escalation clause — a pre-agreed percentage increase applied to the base tariff each year. This escalation rate is negotiated upfront and is typically lower than expected Eskom tariff increases, providing offtakers with long-term price certainty and protection against grid tariff volatility.
What happens if Eskom changes its wheeling fees during my contract?
Changes to Eskom’s wheeling tariff structure — which are subject to NERSA approval — can affect the economics of a wheeling transaction. Well-drafted PPAs include change-in-law provisions that address how such changes are handled commercially between the IPP and offtaker. This is one of the reasons it is important to have expert legal and commercial advice when entering these agreements.
How long does it take to get a PPA and wheeling agreement in place?
The timeline varies depending on project readiness, grid connection availability, and the offtaker’s internal approval processes. Working with SOLINK Energy Brokers significantly accelerates the process — because all projects on our platform are pre-vetted and commercially ready, businesses avoid the months of due diligence typically required when sourcing IPPs independently. Get in touch to discuss indicative timelines for your specific requirements.
Get Expert Guidance on Your Energy Contracts
Understanding the difference between a PPA and a wheeling agreement is the first step. Structuring both correctly — with the right IPP, the right tariff, and the right terms — is where the real complexity lies. That is where SOLINK Energy Brokers adds value.
As an independent energy broker with no supplier ties, SOLINK acts in the offtaker’s interest at every stage — from feasibility analysis and solution review through to PPA negotiation, contract signature, and ongoing operational support. Our fees are funded by IPPs, so there is no additional cost to your business. Contact our team today to start the conversation.
→ Contact SOLINK Energy Brokers: https://energy-brokers.co.za/contact/
→ Our Brokerage Services: https://energy-brokers.co.za/services/
→ Market Review & Wheeling Explained: https://energy-brokers.co.za/market-review/
SOLINK Energy Brokers
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