Kenya wind turbines

Project Details

Thematic Project
Renewable Energy
Anton Eberhard
South Africa
Power Futures Lab, University of Cape Town Graduate School of Business (GSB)
Anton Eberhard profile picture

Anton Eberhard

Principal Investigator
Wikus Kruger profile picture

Wikus Kruger

Researcher, University of Cape Town

Renewable Energy Auctions

Improving the design and implementation of renewable energy auctions in Sub-Saharan Africa to accelerate investment in clean energy technologies


Background, challenges and context

Recent years have seen record levels of renewable electricity being procured and the lowest ever prices recorded for long-term renewable energy contracts, in many cases undercutting the costs for fossil-fuel-based electricity generation. This trend in renewable energy investment and costs is in large part driven by the rise of auctions – interchangeably referred to as competitive tenders or bidding programmes – for long-term contracts between Independent Power Producer (IPP) projects and off-takers, typically the national or local utility.

Previously, feed-in tariffs were the most widespread renewables support mechanism but delivered little investment in Sub-Saharan Africa. Auctions, although quite recent, have already delivered more investment in renewables at lower prices than any other procurement or contracting method for the region.

Running effective auctions requires good planning, procurement, and contracting capacity, and can involve significant transaction costs. Auctions also risk attracting too little bidding interest, leading to higher prices, as well as delays in reaching financial close and construction. While these things are important to consider, a well-designed and implemented programme can effectively mitigate these risks, and costs can be easily offset by the benefits of lower tariffs.

However, many African countries have struggled to successfully address the risks and costs involved, resulting in poor outcomes.


Research overview and objectives 

There is an important need to learn from and distil current experiences with renewable energy auctions for the African context.

The specific objectives of this study were to:

  • Improve understanding of renewable energy auction design choices, de-risking mechanisms, implementation modalities, and associated outcomes in Sub-Saharan Africa.

  • Link research on renewable energy auctions in different world regions for the benefit of Sub-Saharan Africa and South Asia.

  • Adapt and apply a coherent analytical framework for renewable energy auctions across different market segments, allowing for comparison and identification of appropriate lessons.

  • Appropriately disseminate and build capacity on renewable energy auction design and implementation for Sub-Saharan Africa.


Research methodology

During phase one of the project, the research team produced five country reports on auction practices in Ethiopia, Namibia, South Africa, Uganda, and Zambia.

Each country report was based on an in-depth case study of the country. It involved data gathering through interviews with key individuals in government and the private sector, including project developers, investors, development partners, and service providers. It also involved extensive document analysis – specifically the procurement documents and contracts – as well as analysis of bid responses and outcomes.

In phase two, the project team looked to pioneering auction programmes in the broader global South, to extract lessons for Sub-Saharan Africa – an additional five country reports on auction practices in Argentina, Brazil, Chile, India, and Mexico were produced.


Research results, key messages, and recommendations

The learnings from this project are captured in a series of individual country reports. In summary, they cover:


Ethiopia’s renewable energy auction programmes have the potential to become regional best practice. This report looks at how Ethiopia managed to secure the lowest solar photovoltaic (PV) project prices in Sub-Saharan Africa through its procurement programmes, but also considers why it has struggled to secure existing investments, and how future auction rounds can be improved.


By 2018, Namibia hosted the third highest number of independent power projects in Sub-Saharan Africa. It is also the country in the region with the cheapest, local currency-based utility-scale solar PV project (the Hardap facility) – with no sovereign support. The report analyses the drivers behind the rapid market development, focusing in particular on the design and implementation of the competitive procurement programme that delivered the Hardap project.

South Africa

This report describes how the design features and implementation structures of South Africa’s Renewable Energy Independent Power Producer Procurement Programme (REI4P) and the Small Projects Independent Power Producer Procurement Programme (SP-I4P) have contributed to their outcomes. It also looks at policy uncertainty and implementation challenges, in order to consider how these affect the future design and sustainability of the programmes.

Following on from this, a second report on South Africa provides an update on the status of the REI4P, providing insights into the status and important changes in the programme.


In 2014, Uganda became the first Sub-Saharan African country outside of South Africa to embark on a renewable energy auction programme through competitive bidding. The hybrid nature of the procurement mechanism – whereby winning projects received a feed-in tariff set by the regulator and a competitively set premium payment – made the programme particularly attractive to investors. This report analyses the factors that underpinned the outcomes of the auction.


This report analyses Zambia’s Scaling Solar and GET FiT solar PV auction programmes. Both broke African price records, despite an economic slowdown and investors facing an unbankable off-taker in the state-owned vertically integrated utility ZESCO.


In May 2016, the Argentinian government launched its RenovAr programme to manage the auction of renewable energy generation projects. The programme differed from previous ones in two basic respects. The first was the use of competitive auctions to assign 20-year power purchase agreements (PPAs). The second was the establishment of a trust fund to provide loan guarantees and investment financing in an attempt to mitigate the macro-economic and sectoral risks linked to renewable energy investment in Argentina. The design, implementation, and results of the first four rounds of the RenovAr programme that took place between May 2016 and mid-2019 are analysed in this report.


Institutional reform of the Brazilian energy system in 2004 promoted the use of energy auctions as the primary mechanism to procure energy and capacity with a long-term focus. To a large extent, the success of the country’s auction programme has depended on the attention given by the public authorities to the design of the auctions, including the regulatory framework and the implementation process. This report includes a description and analysis of the auction design, including auction volumes, qualification criteria and processes, bidder ranking and winner selection, buyer and seller liabilities, and approaches to project de-risking and credit enhancement.


The Chilean Electricity Act enacted in 1982 created an electricity market where power generation companies and large customers can freely negotiate energy supply contracts. This report focuses on the energy supply contracts that distribution companies, as mandated by law, auction on behalf of their regulated customers.


India has one of the world’s oldest and largest renewable energy auction programmes – it is also considered to be among the most successful and ambitious. This report focuses primarily on the design, implementation, and results of renewable energy auctions run by the wholly state-owned Solar Energy Corporation of India (which acts as both a nodal agency and an intermediary procurer in national renewable energy auctions) between January 2017 and June 2020.


Mexico embarked on a power sector reform programme in 2013 to develop a new electricity market. The country executed three energy auctions in the post-reform period, which awarded 8 GW of new generation capacity at some of the lowest renewable energy prices worldwide. This report includes a description and analysis of the auction design and an analysis of auction implementation arrangements.

In addition to identifying auction best practice lessons, over the course of the project the team has found that across Sub-Saharan Africa:

  • Most of the newly added independent power projects are now renewable energy based. Solar PV in particular is dominating the energy mix of new build IPPs. This could be attributed to the fact that the technology is proven, mature, cheap, and quickly scalable.

  • Development finance institutions (DFIs) are increasingly supporting renewable energy based IPPs.

  • Structured procurement programmes (feed-in-tariffs and auctions) are making progress in some markets – most notably South Africa, Namibia, and Mauritius – but most countries are still struggling to successfully finalise their first auctions and follow-up rounds of procurement remain rare.

The team’s work has also included tracking and updating a database of private power sector investments and global renewable energy auctions; a formal discussion with South Africa’s Independent Power Producers Office on auction research and possible inputs into new auction design; participation in an AUctions for Renewable Energy Support (AURES) applied research programme advisory board meeting (providing inputs on auction design and implementation questions and research outputs); providing a briefing to MBA students at Saïd Business School, University of Oxford, on power investment trends and challenges; and presenting on ‘International auction experiences: lessons for REI4P’ at the digital Windaba conference. The country case studies developed under this project have been brought together in a book that will be published by Oxford University Press.


Local partners

Government officials from Uganda, Mozambique, Rwanda, Zambia, Zimbabwe, Ethiopia and Sierra Leone

External Journal Articles
Back to blackouts: How SA’s energy problems are just the tip of the iceberg
Lessons from Brazil and India as South Africa gets set to resume renewables auctions
De-risking solar auctions in sub-Saharan Africa – A comparison of site selection strategies in South Africa and Zambia
Myths and truths around South Africa’s recent renewable energy auction