Success factors in off-grid energy auctions: A comparative analysis of selected cases from low- and middle-income countries

Abstract

Renewable energies are a key to reducing carbon emissions and enabling access to affordable energy for rural populations in many low- and middle-income countries. For this reason, many governments have started to introduce auctions for off-grid renewable energy. Despite their relevance for clean, accessible energy, the factors for successful or failed off-grid renewable energy tenders have not been broadly studied yet. This paper investigates the success factors for the successful implementation of off-grid energy auctions to enhance rural energy access in low- and middle-income countries. For the scope of this research, the off-grid energy tenders are considered successful if they lead to cost-efficient outcomes, have a high implementation rate and improve the equality of access to energy. Using success measures and success factors from the state of knowledge on energy auctions, three real-world cases from Peru, Uganda and Senegal are analysed and compared. The investigations show that auctioneers should strike a balance between 1) economies of scale and streamlining administrative procedures, 2) allowing adequate product designs for a diverse group of beneficiaries and 3) attracting enough bidders in this relatively young sector. Moreover, this paper confirms that balancing the developers’ risks and public risks is essential in designing off-grid energy tenders and that there are several ways to do this. Furthermore, the advantages and limitations of different support payment types are illustrated. Finally, regarding governance, the real-world cases in this research underscore the importance of clarity about responsibilities and procedures, without which significant delays can be incurred.