Op-ed: SA renewables procurement needs urgent fix

April 01, 2025

From the newsletter

Once a globally recognised success, South Africa's Renewable Energy Independent Power Producer Procurement Programme (REI4P) is now struggling. In an opinion article, Dr Wikus Kruger, Director of the Power Futures Lab at the University of Cape Town’s Graduate School of Business, outlines the key reforms needed to address current problems.

  • Dr Kruger argues that the initial bid windows were highly effective, driving down costs for solar and wind energy. However, subsequent delays and uncertainties have hampered progress. Recent bid windows have been particularly affected by transmission bottlenecks, preventing the awarding of wind projects and stranding solar projects.

  • Dr Kruger’s research expertise spans more than two decades. He has written or contributed to over 19 scholarly publications.

More details

By Dr Wikus Kruger

(The article was first published in Engineering News)

South Africa’s Renewable Energy Independent Power Producer Procurement Programme (REI4P) was once a global model of success. It drove down costs, attracted over R200-billion in investment, and delivered 11,000 MW of clean energy. But today, the programme is faltering. Grid constraints, slow procurement cycles, and institutional challenges are stalling progress. Without urgent reforms, South Africa risks deepening its energy crisis, deterring investors, and missing key climate goals.

Early Success, Growing Stagnation

The first four bid windows (2011-2015) were transformational, securing competitive prices and delivering projects on time and within budget. Costs for solar PV and wind energy fell by 77% and 93%, respectively. The programme was widely hailed as a best-practice model. However, from 2015 onward, delays and political uncertainty led to a three-year freeze. While REI4P was revived under President Ramaphosa, its momentum has never fully returned.

The last two bid windows have exposed major vulnerabilities. Bid Window 6 collapsed due to grid constraints, with only 860 MW of solar PV awarded and no wind projects proceeding. Bid Window 7 secured 1 760 MW of solar PV, but once again, grid bottlenecks prevented any wind projects from being awarded. The pattern is clear: procurement continues despite transmission bottlenecks, leaving much-needed projects stranded.

Transmission Failures are Strangling REI4P

The Eastern, Northern, and Western Cape—where the best wind resources exist—have little to no available grid capacity. Yet, procurement planning has not sufficiently aligned with transmission expansion. Eskom’s Transmission Development Plan envisions adding 14 000 km of new power lines over the next decade, but execution remains sluggish.

To resolve this, South Africa must adopt international best practices:

Allocate grid capacity to prequalified projects (by adjusting the grid capacity allocation rules) to reduce investor uncertainty.

Introduce plug-and-play renewable-energy sites, where transmission infrastructure is pre-built.

Adjust bid scoring criteria to reward projects requiring fewer grid upgrades.

Without decisive action, South Africa will continue to see stalled projects, investor withdrawals, and worsening power shortages.

Fixing Procurement Design and Institutional Weaknesses

The Independent Power Producer Office (IPPO) was once a global benchmark for transparent procurement. But over time, institutional weaknesses have emerged. The office lacks the resources, staffing, and autonomy to run an effective programme.

Key reforms must include:

Establishing close coordination with the National Transmission Company of South Africa to align transmission planning and procurement decisions.

Empowering the IPPO to access top-tier legal, commercial, and technical advisory support.

Creating a dedicated research office within the IPPO for ongoing programme evaluation and innovation.

In the long term, the IPPO should transition to a permanent home within an independent transmission, system, and market operator (TSO) to streamline its role in procurement across public and private sectors.

As its credibility is strengthened, the IPPO’s procurement role could expand to streamline current parallel public and private procurement processes. Acting as procurer for the entire distribution system (municipalities, Eskom Distribution, and large industrial users), the IPPO can leverage economies of scale and competitive pressure to reduce sector-wide costs and risks. And once it is transferred and absorbed by an independent TSO, it might also play a role in procuring capacity reserves for the Central Purchasing Agency and ancillary services for the System Operator.

Additionally, South Africa’s public procurement framework must evolve to reduce costs and improve efficiency by:

Introducing prequalification steps to filter credible bidders.

Implementing electronic bidding platforms to reduce administration burdens.

Allowing flexibility mechanisms, such as indexation for key cost drivers (e.g. shipping, steel prices), to address market volatility.

Conducting legal and financial evaluations post-award to reduce upfront costs.

Holding regular, more frequent, and smaller auctions to enhance market certainty and confidence, increase competition (keep prices down), and reduce the bottlenecks that can stymie mega rounds.

Socio-Economic Development Must Remain a Priority

REI4P was designed to deliver more than just electricity—it was also meant to drive economic transformation. Earlier bid windows mandated high levels of local content, black ownership, and community benefits. Yet, recent rounds have seen these commitments diluted. If we want a just transition, socio-economic benefits must not be an afterthought.

To strengthen these commitments:

Mpumalanga should receive priority for renewable-energy investment, ensuring affected coal workers and communities are included.

Evidence-based, strategic local content enforcement should be embedded in procurement rules (based on South Africa’s Renewable Energy Masterplan).

Enterprise development and community shareholding targets should be reinforced, not weakened.

A Political Choice

Fixing REI4P is not a technical challenge—it is a political one. The fundamentals of a world-class renewable energy programme remain in place. But unless government sends clear, consistent signals of its commitment, South Africa will continue to suffer from rolling blackouts, lost investment, and rising electricity prices.

A decade ago, REI4P was a symbol of progress. It can be again—but only if we act decisively now.