Record-low renewable energy bids in Africa have been a consistent feature of energy news for the past five years. Egypt’s round of utility-scale solar auctions attracted bids of $17–24/MWh from international developers. South Africa’s REIPPPP rounds produced solar bids below ZAR 400/MWh and wind bids competitive with global benchmarks. Zambia’s GetFit auction hit records for East African solar. The headline story — that African solar and wind are now cost-competitive with global benchmarks — is accurate.
The less-reported story is the cancellation rate. Across Africa’s major renewable energy procurement programmes, a meaningful share of projects that win tariff bids fail to reach financial close within their contracted timelines, are renegotiated after award, or are quietly abandoned. IRENA’s 2024 review of African auction programmes found that “development failure” rates — projects that were awarded but did not reach commercial operation within five years — were substantially higher in Africa than in comparable emerging market programmes in South Asia or Latin America. The reasons are structural, and they have not been addressed by simply bidding lower.
What the Bid Price Does Not Include
A renewable energy bid price captures the cost of building and operating a generation asset at a given tariff. It does not capture the cost of the development work that must happen between award and financial close: grid connection agreements, environmental impact assessments, land tenure formalisation, community consultation processes, off-taker creditworthiness verification, and the negotiations with lenders that determine whether the project can raise the debt it needs.
In South Africa’s REIPPPP — the continent’s most mature procurement programme — the time from bid submission to financial close has historically run twelve to eighteen months for well-prepared projects and up to thirty-six months for projects encountering grid connection or environmental delays. During that window, interest rates, exchange rates, equipment costs and country risk perceptions can all shift materially. A bid that was viable at submission may be unviable at financial close — and bidders who locked in aggressive tariffs to win the auction face a binary choice: seek a renegotiation or walk away.
In less mature procurement markets — Nigeria’s NESI auction framework, Tanzania’s earlier IPP procurement rounds, Zambia’s post-GetFit competitive tenders — the development risk between bid and financial close is higher still. Grid access processes are less predictable. Off-taker risk (typically a financially stressed national utility) is more difficult to mitigate. Environmental and social permitting timelines are less standardised. The result is that projects with competitively low bids face higher development costs between award and financial close than their tariff assumptions can absorb.
The Race-to-the-Bottom Dynamic
Renewable energy auctions are designed to minimise the tariff paid by the offtaker — a sensible objective in a sector where equipment costs have fallen rapidly and where competitive pressure should produce efficient pricing. The problem is that aggressive competitive auctions create incentives for developers to bid at tariffs that assume optimistic development timelines, favourable financing terms, and minimal contingency for country-specific risk. The developer that wins with the most aggressive bid is the one who has made the most optimistic assumptions.
When those assumptions prove wrong — as they frequently do in markets with unpredictable grid connection processes or utility payment risk — the developer is faced with a project that cannot be financed at the bid tariff. The outcomes vary by market and contract structure: in South Africa, REIPPPP’s relatively robust contract framework has historically produced renegotiation requests that Eskom and the Department of Energy manage case by case. In less structured markets, the outcome is often project abandonment, with the grid capacity that was supposed to be built remaining on paper.
The World Bank and IRENA have both documented this pattern across emerging market auction programmes. The consistent finding is that the lowest-bid auctions do not necessarily produce the most delivered capacity. Countries that achieve rapid deployment of renewable energy typically combine competitive auctions with pre-development support — grid connection agreements secured before bid submission, standardised environmental impact assessment processes, and off-taker credit risk mitigated through government or DFI guarantees.
South Africa: The Most Instructive Case
South Africa’s REIPPPP is the continent’s most studied procurement programme, and its evolution illustrates both the problem and the solution trajectory. Rounds 1–4 (2011–2015) delivered 6,422MW of contracted renewable capacity, with a high delivery rate — most projects reached commercial operation within two to three years of financial close. The round structure, with standardised power purchase agreements and Eskom as a creditworthy offtaker backstopped by government, made the development pathway relatively predictable.
Rounds 5 and 6 (the “Bid Window” rounds from 2021 onward) have been more challenging. Grid connection delays — driven by Eskom’s constrained transmission capacity and slow grid access agreement processes — have extended development timelines for multiple projects. A handful of Round 5 projects required tariff adjustments or timeline extensions. The more commercially complex Lyra Energy structure (Standard Bank as sole lender under a private offtake framework rather than an Eskom PPA) has emerged in part as a response to the REIPPPP timeline risk — private offtake PPAs allow developers to bypass Eskom’s congested procurement queue.
The implication for South Africa’s Round 6 and subsequent procurement is that the current auction framework may need to be redesigned around faster grid access processes before it can deliver the 3GW per year of new renewable capacity that the country’s Integrated Resource Plan target requires.
The Reform Agenda
Three procurement design reforms consistently appear in IRENA and World Bank analysis of auction performance in emerging markets, and Africa’s high-cancellation-rate markets have largely not implemented them.
The first is pre-qualifying grid connection capacity before auction. Auctions where winning projects are guaranteed a grid connection point — with the connection agreement in place before bid submission — have dramatically lower cancellation rates than auctions where developers must compete for scarce grid connection capacity after winning the tariff bid. Pre-qualifying grid capacity requires investment in transmission planning that energy ministries often lack the capacity and budget to do, but it is the single most effective intervention for reducing the gap between awarded and built megawatts.
The second is off-taker risk mitigation structured into the procurement framework. Government payment guarantees, DFI partial risk guarantees, or escrow mechanisms that protect developers against utility non-payment can allow lower tariff bids to be realistic rather than aspirational — because the developer is not pricing in the probability of non-payment on top of the project’s operating costs.
The third is bid security structures that prevent speculative low bids. Higher bid bonds, development milestones with genuine penalties for non-performance, and credit checks of winning bidders’ financial capacity all increase the cost of bidding low without the ability to deliver. They also reduce the number of bidders — which is a reasonable trade-off in markets where having fifty bids of which twenty are from developers who cannot finance the project is less useful than having twenty bids from developers with credible track records.
Africa has the renewable resource, the project pipeline, and increasingly the commercial bank appetite to deploy significantly more clean energy capacity than its current auction frameworks are delivering. The record-low bids are real; they reflect genuine cost reductions in solar and wind technology. The cancellation problem is also real, and it will constrain the rate at which those low-cost bids convert into electrons on the grid until the procurement design catches up with the financing and technology conditions that have changed around it.
