Renewable energy auctions in sub-Saharan Africa
Africa is short of power. Over the past decade, renewable energy auctions have emerged as an effective mechanism to competitively procure utility-scale private power projects. This thesis sought to analyse successful renewable energy auctions in sub-Saharan Africa and identify the elements contributing to efficient price and effective project realisation outcomes through comparative case studies in South Africa, Zambia and Namibia. The analysis of empirical data was deepened with reference to existing literature and theory on those elements that contribute to success in Independent Power Projects (IPPs), combined with that on renewable energy auction design and implementation. Project success is defined, from the host country perspective, as competitive project prices and timely project realisation. The literature on contributing elements to IPP success has focused mainly on country and project level factors and the literature on auction design and implementation on programme level factors. An integrated analytical framework that combines these bodies of literature has shown that the introduction of renewable energy auctions provides an essential programmatic element which connects existing country level factors (for example the investment climate, sector regulation, etc.) and project levels factors (for example, project finance and contracts) and is crucial in achieving superior project realisation and price outcomes. Auction price outcomes were mainly determined by factors that act as auction signals, barriers and incentives primarily geared towards increasing competition in the procurement process and lowering projects' cost of capital. These factors include setting and dividing auction volumes prudently over multiple rounds; building and maintaining bidders' trust in the auctioning authority and auction process; limiting auction participation to credible bidders; and ensuring that the contract being bid for is acceptable to lenders and backed by a secure revenue stream. The case studies showed that project realisation is determined by bidder quality, project preparation levels, investor commitment, constraints (revenue stream and political economy) and post-award support. These are influenced by factors from all three levels – country, project and programme – that act as auction signals, barriers, incentives and support measures. Finally, the case studies highlighted the pervasive influence of political economy elements – not included in the analytical framework - as determinative for longer-term auction outcomes
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