1. De-risking solar auctions in sub-Saharan Africa – A comparison of site selection strategies in South Africa and Zambia.
- Author
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Kruger, Wikus, Stritzke, Susann, and Trotter, Philipp A.
- Subjects
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AUCTIONS , *RENEWABLE energy sources , *INVESTMENT risk , *SUSTAINABLE development - Abstract
Abstract While auctions are becoming increasingly popular for tendering renewable energy projects to private developers in Africa, their specific project risk implications are not yet fully understood. This paper identifies project risks arising from two types of auction schemes. It compares an approach where the government pre-selects the sites for future renewable energy plants in Zambia's Scaling Solar initiative to one where project developers choose, secure and conduct due diligence on their sites before bidding in South Africa's Africa's Renewable Energy Independent Power Producers Procurement Programme (REI4P). Semi-structured interviews with developers who have participated in both schemes reveal notably different risk profiles. Despite contrary intentions, site-specific risks have been perceived as the highest overall project risk in the government-led site selection process in Zambia. Specifically, site-specific risks were driven by several severe technical issues such as geotechnical, grid connection and solar irradiation uncertainties. In contrast, in South Africa's developer-led site selection process, site-specific risks have been reported to be important, but less pronounced, and more evenly distributed among technical, economic, legal, permitting and social risk factors. This paper recommends an auction design which minimises project risks for all stakeholders. Where governments pre-select sites, closely consulting the private sector is advisable prior to bidding to identify and mitigate technical and other site-specific risks. Highlights • Explores risk impact of two site selection & preparation strategies for solar PV project procurement in sub-Saharan Africa. • The widely used strategy in the region is for a government institution or utility to select and prepare the project site. • The second strategy is where the private sector developers are responsible for selecting & preparing the site before bidding. • We find that a government-led site selection strategy can lead to increase risks, costs and timelines if poorly executed. • It is argued that more private sector involvement in the site selection & preparation process might reduce these risks. [ABSTRACT FROM AUTHOR]
- Published
- 2019
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