www.gsb.uct.ac.za/mir @AntonEberhard
@AntonEberhard Management Program in Infrastructure Reform and Regulation
University of Cape Town
Accelerating Solar PV Investments in Africa Which regulatory and procurement
mechanisms are optimal?
Presentation to Africa Energy Forum, Istanbul
20 June 2014
www.gsb.uct.ac.za/mir
www.gsb.uct.ac.za/mir @AntonEberhard
How to Promote Renewable Energy Investments?
SUPPLY SIDE
(Renewables)EPC Contracts → → Feed-in-Tariffs →
Renewable Portfolio
Standards (e.g.
Green Certificates)→
Competitive
Procurement of
MW or MWh (e.g.
Electricity Auctions)
→
↕ ↕ ↕ ↕
DEMAND SIDE
(EE or DSM)
Contracts for EE
(e.g. Performance
Based with ESCOs)→ → Standard Offers →
Energy Efficiency
Provider Obligation
(e.g. White
Certificates, Market-
Based Rationing)
→Competitive
Procurement of
NWh or Load
Reduction (DSB)
→
Integrated
Resource
Planning (IRP)
= Supply +
Demand Sides
Auctions of
CO2
Reduction
(e.g. RGGI)
Renewables
or EE
Policy and Regulatory Instruments to Foster Renewables and Energy Efficiency
Source: Maurer, Luiz. EE: Appl icabi l i ty of s tandard offers , competitive procurement and auctions . Presentation. WB Seminar. Washington DC. February 01, 2012.
2
“There is a great variety of regulatory mechanisms and business models
– ranging from “command and control” to more market-driven, on both
demand and supply sides” (Luiz Maurer, 2012. IFC)
www.gsb.uct.ac.za/mir @AntonEberhard
RE regulatory and procurement mechanisms in Africa
• Most widely used is FIT
• But outcomes are disappointing
– Prices high
– Inadequate investment
• South Africa abandoned FIT in favour of competitive
tenders
– Prices fell dramatically
– Large investments attracted
• What are the lessons for other countries?
– South Africa is different, but lessons can be adapted to suit other
African countries
www.gsb.uct.ac.za/mir @AntonEberhard
• South Africa now occupies important position globally in debate around most effective policies to expand RE
• Abandoned FIT in favour of competitive tendering
• In less than 3 years:
US$14 billion committed (US$5 bn for PV)
64 projects (23 PV)
3922 MW (1484 MW PV)
• More than 100 shareholder entities
South African experience (1)
www.gsb.uct.ac.za/mir @AntonEberhard
• 86% of finance raised locally.
• Two-thirds of debt from commercial banks with balance from DFIs and pension/insurance funds
• Over 3 bid rounds, PV prices dropped 68%
• Also improvements in economic development commitments
• This presentation explores lessons learned
5
South African experience (2)
www.gsb.uct.ac.za/mir @AntonEberhard
Standard 20 yr, local denominated PPAs + IA + DA
Price caps for each technology
Procurement caps for individual technologies
Financial close 6 months after preferred bidder status
Bids due 3 months after RfP
Up to 5 tender rounds envisaged at 6 month intervals
CoD required within 18 months of financial close
2011 DoE issues RfP for 3625MW of renewable power
South African RE tender process
www.gsb.uct.ac.za/mir @AntonEberhard
Tight (impressive) time lines
@AntonEberhard
REIPPPP milestones 2011 2012 2013 2014
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
RFP published
3
Aug
Round 1 Bid submission
4
Nov
Round 1 Preferred bidders
7
Dec
Round 1 Financial close Jun
5
Nov
Round 1 Planned COD Mar Dec
Round 2 RfP
Round 2 Bid submission
Round 2 Preferred bidders
Round 2 Financial close
Round 3 RfP
Round 3 Bid submission
Round 3 Preferred bidders
Round 3 Financial close
www.gsb.uct.ac.za/mir @AntonEberhard
Tight (impressive) time lines
@AntonEberhard
REIPPPP milestones 2011 2012 2013 2014
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
RFP published
3
Aug
Round 1 Bid submission
4
Nov
Round 1 Preferred bidders
7
Dec
Round 1 Financial close Jun
5
Nov
Round 1 Planned COD Mar Dec
Round 2 RfP
7
Dec
Round 2 Bid submission
5
Mar
Round 2 Preferred bidders
21
May
Round 2 Financial close Dec
9
May
Round 3 RfP May
Round 3 Bid submission
19
Aug
Round 3 Preferred bidders
29
Oct
Round 3 Financial close Jul
www.gsb.uct.ac.za/mir @AntonEberhard .
Qualification
Criteria • Structure of project
• Legal
• Land
• Environment
• Financial
• Technical
• Economic
development
• Bid guarantee
Evaluation Criteria
Price 70%
Economic 30%
Development • Job creation
• Local content
• Ownership
• Management control
• Preferential
procurement
• Enterprise development
• Socio-economic
development
Evaluation process
www.gsb.uct.ac.za/mir @AntonEberhard
• Tender exempted from standard PPP regulations
• Ad-hoc DOE IPP office established, led by experienced PPP
manager
• US$ 10 million was spent on tender design and bid evaluation
• Large legal, technical and financial advisory team assembled (local
& international)
• General consensus that quality of documentation excellent
• Secure and transparent evaluation process
Tender and evaluation process
www.gsb.uct.ac.za/mir @AntonEberhard
• Make a case for renewable energy
• Find a program champion
• Adopt a business-friendly not a bureaucratic approach
• Take a long term approach, multiple rounds
• Commit sufficient resources to procurement
• Ensure quality procurement and contracting documentation and processes are in place
• Take advantage of external sources of funding
• Assess effectiveness of FIT, consider adopting competitive tendering regime, taylored for specific country needs
Lessons from South Africa
www.gsb.uct.ac.za/mir @AntonEberhard
Competitive tenders vs Feed-in tariffs (REFIT)
@AntonEberhard
Competitive tenders Feed-in tariffs
Potentially yield lower prices through
market competition
No competition and excessive rents
possible
(but lower prices could be specified in
subsequent rounds)
www.gsb.uct.ac.za/mir @AntonEberhard
Competitive tenders vs Feed-in tariffs (REFIT)
@AntonEberhard
Competitive tenders Feed-in tariffs
Potentially yield lower prices through
market competition
No competition and excessive rents
possible
(but lower prices could be specified in
subsequent rounds)
Higher transaction costs
(offset, hopefully, by lower energy prices)
Lower transaction costs
(but still need good design and evaluation)
www.gsb.uct.ac.za/mir @AntonEberhard
Competitive tenders vs Feed-in tariffs (REFIT)
@AntonEberhard
Competitive tenders Feed-in tariffs
Potentially yield lower prices through
market competition
No competition and excessive rents
possible
(but lower prices could be specified in
subsequent rounds)
Higher transaction costs
(offset, hopefully, by lower energy prices)
Lower transaction costs
(but still need good design and evaluation)
More complex
(narrows potential pool of developers)
Simpler
(widens potential pool of developers)
www.gsb.uct.ac.za/mir @AntonEberhard
Competitive tenders vs Feed-in tariffs (REFIT)
@AntonEberhard
Competitive tenders Feed-in tariffs
Potentially yield lower prices through
market competition
No competition and excessive rents
possible
(but lower prices could be specified in
subsequent rounds)
Higher transaction costs
(offset, hopefully, by lower energy prices)
Lower transaction costs
(but still need good design and evaluation)
More complex
(narrows potential pool of developers)
Simpler
(widens potential pool of developers)
Can include non-price criteria in evaluation
to maximise economic development
Non-price criteria could be specified
a priori
www.gsb.uct.ac.za/mir @AntonEberhard
Competitive tenders vs Feed-in tariffs (REFIT)
@AntonEberhard
Competitive tenders Feed-in tariffs
Potentially yield lower prices through
market competition
No competition and excessive rents
possible
(but lower prices could be specified in
subsequent rounds)
Higher transaction costs
(offset, hopefully, by lower energy prices)
Lower transaction costs
(but still need good design and evaluation)
More complex
(narrows potential pool of developers)
Simpler
(widens potential pool of developers)
Can include non-price criteria in evaluation
to maximise economic development
Non-price criteria could be specified
a priori
Less suitable for procuring small projects Useful for procuring small projects
www.gsb.uct.ac.za/mir @AntonEberhard
Competitive tenders vs Feed-in tariffs (REFIT)
@AntonEberhard
Competitive tenders Feed-in tariffs
Potentially yield lower prices through
market competition
No competition and excessive rents
possible
(but lower prices could be specified in
subsequent rounds)
Higher transaction costs
(offset, hopefully, by lower energy prices)
Lower transaction costs
(but still need good design and evaluation)
More complex
(narrows potential pool of developers)
Simpler
(widens potential pool of developers)
Can include non-price criteria in evaluation
to maximise economic development
Non-price criteria could be specified
a priori
Less suitable for procuring small projects Useful for procuring small projects
Allowed in most jurisdictions Not allowed in some jurisdictions
www.gsb.uct.ac.za/mir @AntonEberhard
Competitive tenders vs Feed-in tariffs (REFIT)
@AntonEberhard
Competitive tenders Feed-in tariffs
Potentially yield lower prices through
market competition
No competition and excessive rents
possible
(but lower prices could be specified in
subsequent rounds)
Higher transaction costs
(offset, hopefully, by lower energy prices)
Lower transaction costs
(but still need good design and evaluation)
More complex
(narrows potential pool of developers)
Simpler
(widens potential pool of developers)
Can include non-price criteria in evaluation
to maximise economic development
Non-price criteria could be specified
a priori
Less suitable for procuring small projects Useful for procuring small projects
Allowed in most jurisdictions Not allowed in some jurisdictions
Easier to integrate with transmission
planning
Difficult to integrate with transmission
planning
www.gsb.uct.ac.za/mir @AntonEberhard
Competitive tenders vs Feed-in tariffs (REFIT)
@AntonEberhard
Competitive tenders Feed-in tariffs
Potentially yield lower prices through
market competition
No competition and excessive rents
possible
(but lower prices could be specified in
subsequent rounds)
Higher transaction costs
(offset, hopefully, by lower energy prices)
Lower transaction costs
(but still need good design and evaluation)
More complex
(narrows potential pool of developers)
Simpler
(widens potential pool of developers)
Can include non-price criteria in evaluation
to maximise economic development
Non-price criteria could be specified
a priori
Less suitable for procuring small projects Useful for procuring small projects
Allowed in most jurisdictions Not allowed in some jurisdictions
Easier to integrate with transmission
planning
Difficult to integrate with transmission
planning
Primary objective in developing countries is
to get more power at affordable cost
Objective in rich countries was to create
economies of scale and eventually lower
prices, and off-set carbon emissions
www.gsb.uct.ac.za/mir @AntonEberhard
Prof Anton Eberhard Research, training courses, consultancy
University of Cape Town
The Management Programme in Infrastructure
Reform & Regulation (MIR) is an emerging centre
of excellence and expertise in Africa. It is
committed to enhancing knowledge and capacity to
manage the reform and regulation of the electricity,
gas, telecommunications, water and transport
industries in support of sustainable development.
@Anton Eberhard www.gsb.uct.ac.za/mir
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