Advancing Africa with Renewable Energy Auctions

Renewable energy auctions in South Africa, Uganda and Zambia are changing renewables’ prospects on the continent

Driven by a growing interest in renewable energy technologies as a competitive mechanism for price determination auctions have become the fastest growing renewable energy policy mechanism globally — increasing at a rate faster than even feed-in tariffs and feed-in premiums.

But while renewable energy auctions in predictably sun-drenched locations like Saudi Arabia have been making headlines for years, less media attention has focused on “energy leapfrog” countries in Sub-Saharan Africa, where low-price renewable generated electricity can mitigate potential carbon emissions while providing reliable first-time energy access and opportunities for low-carbon economic growth.

IRENA’s new report, Renewable Energy Auctions: Cases from Sub-Saharan Africa, analyses the design details and price outcomes from three renewable energy auctions in Sub-Saharan Africa — specifically in Uganda, South Africa and Zambia — with the aim to unearth a set of lessons and recommendations that can inform good auction design in the context of emerging market economies.

Renewable Energy Auctions shows that in South Africa, auctions have driven the cost of solar PV and wind power down to less than the average cost of power supply from the national utility and the cost of new coal-fired power stations. Largely based on the country’s success, auctions have emerged as the preferred tool to procure electricity and set renewable energy prices in sub-Saharan Africa, with installed solar PV generation capacity increasing ten-fold across the region between 2012 and 2016.

Recent price developments over time for solar PV auctions in different countries.

Ghana, Mauritius, Uganda and Zambia have run renewable energy auctions, while at least 15 more sub-Saharan African countries are developing auction programmes. In these countries, price outcomes for solar PV have been similar, or even significantly below, global average prices — reflecting growing technology maturity and falling technology costs.

The report shows that to be successful, auctions should be independently managed and associated with transparent and well-designed power purchase agreements and other contracts. They should also be closely linked to wider national development policies, and can be justified with socio-economic and environmental considerations, as well as the need to boost power supply.

To learn more about the state of renewable energy auctions in the region, read Renewable Energy Auctions: Cases from Sub-Saharan Africa.