International procurement policies influencing renewable energy siting – implications for South Africa

Abstract

The South African Renewable Independent Power Producer Procurement Programme selects bid winners based on bid tariff (70% weighting) and various economic development criteria (30% weighting). Locating renewable energy (RE) projects in areas with better resources increases their cost competitiveness. As a result, most successful bids for wind and solar photovoltaic (PV) systems to date have been concentrated in the Eastern Cape and Northern Cape provinces, respectively. Studies have shown that a wider geographic distribution of wind and solar PV projects mitigates the impacts of the variability of wind and solar PV resources, eases grid congestion and generally improves the power system’s operation. This paper conducts a literature review to investigate the procurement methods used in different regions of the world to influence the placement of RE plants, the results of which then inform proposals on adjustments to the current REI4P. The study finds that, after congestion incidents due to concentration of RE plants, some regions implement location-based tariff, where high-resource areas receive the lowest tariff and vice versa. Other regions prioritise on building transmission infrastructure in high-resource areas, while others limit the size of RE installations in one area. Given the current generation and transmission constraints in South Africa, it is important to encourage geographical dispersion of RE plants and avoid RE curtailment, since this can escalate the cost of RE integration significantly.