Renewable energy auctions in South Africa outshine feed‐in tariffs

Anton Eberhard,Tomas Kåberger

doi:10.1002/ese3.118

Abstract

AbstractSouth Africa's Renewable Energy Independent Power Producer Procurement Program has run four competitive tenders/auctions since 2011, which have seen US$19 billion in private investment, and electricity prices of wind power falling by 46% and solar PV electricity prices by 71%, in nominal terms. Competitive tenders were introduced after an unsuccessful attempt to implement feed‐in tariffs. The tenders incorporated standard, nonnegotiable contract documents, including 20‐year Power Purchase Agreements and an Implementation Agreement whereby the Government of South Africa back‐stops IPP payments by the national utility, Eskom. All of these projects have reached financial close to date and some are already delivering power to the grid. The financing success has been due in part to the requirements for commercial banks to undertake a thorough due diligence of projects prior to bids being offered. The details of the policy package described may be useful for other policy makers in countries developing policies for renewable energy deployment.

Highlights

Costs of renewable energy technologies have fallen during recent years
South Africa offers an interesting example of a renewable energy auctioning system that is attracting significant investment at highly competitive prices
The abandonment of feed-in tariffs was met with dismay by a number of renewable energy project developers that had secured sites and initiated resource measurements and environmental impact assessments

Summary

Introduction

The cost reductions are the result of many different factors, some related to technologies, others to finance, national institutional development, and increased competition. South Africa offers an interesting example of a renewable energy auctioning system that is attracting significant investment at highly competitive prices. Initial published feed-in tariffs were generally regarded as generous by developers – 15.6 USc/kWh for wind, 26 USc/kWh for solar PV, and 49 USc/kWh for concentrated solar (troughs, with 6 h storage).2 But considerable uncertainty about the nature of the procurement and licensing process remained.

Results

Conclusion