In brief

South Africa has a growing need for greater power system capacity, and it has looked to solar energy and other renewables to fill the gap. The Renewable Energy Independent Power Producers Procurement Programme (REIPPPP) focuses on using public-private partnerships with independent power producers to develop sustainable energy facilities.

The challenge

Economic growth and electricity consumption have been outpacing power system capacity-building in South Africa for well over two decades. Among the options that were not being sufficiently deployed were sustainable initiatives such as renewable energy.

The initiative

In 2009, the South African government “began exploring feed-in tariffs (FITs) for renewable energy, but these were later rejected in favour of competitive tenders [1]. The resulting programme, now known as the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), has successfully channelled substantial private sector expertise and investment into grid-connected renewable energy in South Africa at competitive prices”. It encouraged the use of public-private partnerships (PPPs) in developing the energy facilities.

The Department of Energy (DoE), in collaboration with key stakeholders, looked at various options for alleviating the crisis, including increasing and accelerating the participation of Independent Power Producers (IPPs) in the renewable energy sector.

The REIPPPP has been implemented according to the DoE’s Integrated Resource Plan 2010-2030 and authorised through two ministerial determinations which specify the amount of new renewable power generation needed – of 3,725 megawatts (MW) and 3,200 MW respectively. They also specify which renewables should be used, such as wind, solar and small hydro, and in what proportions. The REIPPPP has been designed to contribute towards these specific procurement targets, as well as to the broader objectives of socioeconomic and environmentally sustainable growth. It has the aims of starting and stimulating the renewable industry in South Africa and, in particular:

  • To mitigate the shortfall in both supply and demand management solutions for electricity.
  • To provide a flexible procurement service to the DoE for a responsive and effective reply to the urgent power infrastructure development needs of the country.
  • To reduce carbon emissions while producing electricity.

The public impact

By 2014, a total of 64 projects had been awarded to the private sector, and the first projects were already beginning work. This places the REIPPPP among the top ten privately-funded renewable energy programmes in the world in recent years.

Prices have dropped over the three bidding phases, with average solar photovoltaic (PV) tariffs decreasing by 68 percent and wind dropping by 42 percent, in nominal terms. There have been notable improvements in the economic development commitments, primarily benefiting rural communities.

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What did and didn't work

All cases in our Public Impact Observatory have been evaluated for performance against the elements of our Public Impact Fundamentals.

Legitimacy

Stakeholder Engagement Strong

The main government stakeholders are the DoE, the National Treasury and the Development Bank of Southern Africa (DBSA). The government appointed the engineering firm Mott Macdonald company as lead consultant for the design and delivery of the renewable energy procurement process. Their role includes coordinating the government stakeholders and its financial, legal and technical advisors. Eskom, the South African public electricity supplier, is supporting government-led initiatives for REIPPPP in the region, although without providing funding.

Political Commitment Strong

There are a number of examples which show a strong political involvement from the South African government:

  • President Zuma’s commitment to green energy during the COP15 meeting in Copenhagen and South Africa’s subsequent hosting of COP17 in Durban, where the government’s Green Accord with the private sector and other stakeholders was signed.
  • The involvement of two major government departments (the DoE and the NT) in setting up the REIPPPP, including the NT’s 2011 funding of the project, which amounted to SAR100 million.

Public Confidence Weak

There is no information available on the response of the South African public to the renewable energy initiative. However, there is no doubt that the majority of the people believe that corruption has increased over the past few years and they have limited confidence in the Zuma government.

“More than half of all those who come in contact with public service providers – 56 per cent – were asked to pay a bribe in the past year, according to a new survey of six southern African countries published by Transparency International, the anti-corruption organisation” [2] The report was issued in 2011, and there has been little, if any, improvement since.

Policy

Clear Objectives Good

The REIPPPP’s objectives were clearly stated at the outset and are relevant to the issue the project is trying to solve:

  • To achieve a greater balance between three aspects (economic growth and development, energy access and security, and environmental sustainability), while focusing on achieving a balanced energy mix to include more gas and renewables.
  • To promote private sector participation in renewable generation.
  • To promote economic development in rural areas.

The amount of energy required was specifically laid out in terms of the number of MWs and the proportion supplied by each form of renewable, such as wind and solar.

Evidence Fair

Programmes similar to REIPPPP, in particular its procurement process, had been conducted before by Eskom, and these became the template for the REIPPPP bidding process.

Feasibility Fair

There is little information publicly available to feed into the evaluation of REIPPPP’s feasibility. It is established, though, that:

  • Generating electricity through renewable sources, especially solar, is a realistic form of energy production. (“South Africa has higher degrees of solar radiation than most other countries and the intensity of radiation is almost twice that of Europe.”) [3]
  • For a country as dependent on coal for its energy as is South Africa, this programme can bring a beneficial change to its industry by producing low-cost electricity.

Action

Management Strong

The following extract from the report published by the Public-Private Infrastructure Advisory Facility (PPIAF) indicates the strength of the management team.

“The REIPPPP team was led by a senior manager from the National Treasury PPP Unit who had worked there since its creation in 2000, had helped establish Treasury’s rigorous PPP project appraisal framework, and had been involved with DOE’s efforts to promote IPPs as early as 2007." [4]

“Other legal and technical experts were also brought on board and formed a small, tightknit team, which was viewed favourably by both the public and private sectors as a professional unit with a track record of considerable expertise in closing PPP contracts and a reputation as problem solvers and facilitators rather than regulators. This kind of credibility allowed the unit to act effectively as a champion of the REIPPPP process.”

Measurement Good

The success of the REIPPPP is measured by a number of parameters, including:

  • The amount of energy (in MW) produced after implementation, with specific targets for the different forms of renewables.
  • The proportion of energy provided by renewables as a proportion of the total energy capacity.
  • The value for money provided by the IPPs during the procurement process and during and after implementation.

Alignment Strong

The following examples depicts the strong alignment of interests and cooperation between the various stakeholders:

  • The REIPPPP has benefited from high-level political support, in the form of policy statements on renewable energy and President Zuma’s commitment to green infrastructure.
  • The team had an excellent working knowledge of PPP contracts and were experienced managing consultants who had credibility with both public and private sector stakeholders.
  • The World Bank facilitated a US$6 million grant from the Global Environment Facility for advisory services under the Renewable Energy Market Transformation Project.
  • The REIPPPP’s government funding was originally made available through a memorandum of agreement signed by the DOE, the National Treasury and the DBSA.
  • The local financing of individual projects has seen the involvement of insurance and pension funds such as Old Mutual, Sanlam and Liberty.