Summary: BLP partners Alexander Sarac and Kiran Arora explain
how South Africa's REIPPP model could be translated to work in
other sub-Saharan African economies, as well as the current
challenges faced when implementing the right mix of renewable
In 2011, South Africa instigated the most successful and
effective public-private renewable energy policy initiative in the
African region. Together the Department of Energy, National
Treasury and the Development Bank of South Africa established the
Renewable Energy Independent Power Producer Procurement Programme
(REIPPP), borne of a need to combat South Africa's escalating
energy prices and disproportionately high emissions levels.
So far, the scheme has successfully produced 39 functioning
projects, with almost 30 more under construction, generating more
than 2000MW of renewable energy. It is estimated that in the coming
years, generation will double to at least 4000MW to supply the
country's ever-growing energy demands.
The cornerstone of the REIPPP is its competitive bidding
process, which encourages private investors to bid on renewable
energy power projects including solar photovoltaic, concentrated
solar thermal, onshore wind, biogas, biomass solid, landfill gas
and small hydro. Eskom, the South-African Government-owned
electricity utility then purchases the power generated by the
renewable projects and transports it onto the main power grid.
The tender and bidding process has been designed to promote
intense competition between bidders, therefore keeping costs
comparatively low. This has been achieved by introducing caps on
the maximum capacity to be acquired through certain renewable
energy categories in addition to caps on the price for each
renewable energy technology itself.
An unusual feature of the bidding process is the requirement for
bidders to 'lock-in' their financing before bids are
submitted. This way the burden of risk is shifted onto the lenders
and enables deals to be closed with greater efficiency by
encouraging realistic offers that are practically viable once the
contracts are agreed. The demanding participation requirements and
the related costs and risk for the investors and developers were
off-set by the fact that the REIPPP included several bidding
rounds, thus allowing unsuccessful bidders to resubmit their
There have already been several successful rounds of bidding,
each time the process is being refined to streamline the
procurement system and to further increase competition amongst
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