International experiences with tender procedures for renewable energy – A comparison of current developments in Brazil, France, Italy and South Africa

Abstract

Tenders are a fast spreading instrument for the expansion of renewable energies. However, there is a need for current analysis of experiences and results as in many countries tenders were introduced only few years ago. The objective of this study is to provide an up-to-date comparison of tender results for wind power and photovoltaics in Brazil, France, Italy and South Africa. We analyze and discuss rates of completion, market concentration and auction prices, based on data and literature research as well as expert interviews. Data on project status shows that rates of on-schedule completion are well below 100% ranging between 14% in Brazil and 41% in South Africa (wind). However, final rates of completion of 100% are possible (South Africa). With exception of France current data suggests cancellation rates of less than 5%. A systematic connection between project cancellations and the instrument of tenders could not be identified. The market share of the five largest owners differs largely between the countries and ranges from 33% (Italy) to 70% (South Africa). Despite the high level in South Africa, the significant oversubscription of tender volumes suggests that free price formation likely was not constrained. Nevertheless, small actors (<50 MW total capacity) are rare in Brazil and South Africa. For Italy their share cannot be determined due to lack of disclosure obligations on ownership structure. In all countries except Brazil auction prices have continuously fallen by 33% (Italy, wind energy) to 76% (South Africa, photovoltaics). In Brazil, the auction price increased from auction round eight to 14 from 50% to 85% of the first auction price. However, auction prices are highly dependent on factors outside of the support scheme of tenders (e.g. interest rates), so that their evolution and level are not a suitable indicator to determine whether tenders lead to minimal support costs.

Analysing the Impact of Renewable Energy Auctions on Market Concentration

“…The case studies carried out in the EU-funded AURES project show that small actors are usually discouraged in RES-E auctions [4,30]. [2] analyses the effects that a shift from ASFITs/FIPs to auctions might have on the incentives to deploy community wind projects in Germany and show that wind projects developed by the local community face the highest challenges in auctions [14]. finds that an overwhelming majority of awarded winners (90 %) in the 2017 wind onshore energy auction in Germany were citizens' energy cooperatives.…”

“…However, the analysis of the influence of RES-E auctions and auction DEs on MC has not received much attention in the literature. Indeed, MC has received very limited attention in both the academic and nonacademic literature on RES-E auctions (see section 2.1) [10,14,31,32]. are exceptions in this regard [31].…”

“…An increase in MC could result in higher prices and lower consumer welfare even when collusion is absent [13]. Auction design that limits the participation of firms and actor diversity, and hence has a direct effect on the market concentration of the awarded bidders, could be expected to have detrimental effects on competition since a sufficient number of actors is a prerequisite for competition, free price formation and the lowest possible auction prices [14]. In fact, in the auction literature, new entrants are desirable to increase competition [15] and the attractiveness of an auction to potential bidders is one of its most important features [16].…”

Institutionalising decarbonisation in South Africa: navigating climate mitigation and socio-economic transformation

“…During this stage, the REIPPPP developed in ways that reflected the underlying ideological divisions. There was a stunningly quick drop in prices, following both global developments in renewables pricing and the high levels of competition in South Africa's auctions (Bayer et al 2018). For price-sensitive actors like the Energy Intensive Users Group, this development started to transform their orientation to renewable energy.…”

A Financial Evaluation of a Multiple Inclination, Rooftop-Mounted, Photovoltaic System Where Structured Tariffs Apply: A Case Study of a South African Shopping Centre

“…As part of the terms and conditions of the contractual agreement, yield warranties are agreed upon. If the PV system cannot produce the agreed electricity yield over the predetermined period, then legal disputes may arise [60]. Therefore, the degree of accuracy from the yield simulations must be increased.…”