Feed-in tariffs or auctions? : Procuring renewable energy supply in South Africa

Abstract

Feed in tariffs have been the most widely used support mechanism to encourage the growth of grid-connected renewable energy. But could competitive tenders or auctions offer lower prices while still providing adequate incentives for market entry by renewable energy suppliers. This note looks at recent developments in South Africa, which initially explored feed in tariffs for renewable energy but then turned instead to competitive tenders. Initial outcomes are encouraging: there has been much market interest, and subsequent bidding rounds have seen prices fall.