Renewable energy auctions in South Africa outshine feed-in tariffs

Journal article, 2016

South 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.