South Africa’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) has long been regarded as one of the most successful public-private partnership programmes in emerging markets. It catalysed billions in investment, established a credible procurement framework, and enabled the rapid introduction of renewable energy into the national generation mix. However, as the power system and policy landscape have evolved, so too must the assessment of REIPPPP’s continued relevance and design.
The early bid windows (BW1 to BW4) can be considered an unequivocal success. At a time when South Africa faced acute capacity shortages, policy uncertainty, and limited private sector participation in generation, REIPPPP provided a bankable, transparent, and competitive capacity procurement mechanism. While the tariffs in the initial rounds were relatively high, this reflected global technology costs at the time as well as a risk premium associated with a first-of-its-kind programme. Crucially, these rounds achieved their primary objective: they unlocked private investment, established a local renewable energy industry, and diversified the generation mix.
Moreover, the programme created institutional credibility. Standardised documentation, government-backed support mechanisms, and a disciplined procurement process built investor confidence and enabled South Africa to emerge as a leading destination for renewable energy investment. In this context, higher early-stage costs were justified by the long-term structural benefits delivered to the sector.
However, from Bid Window 5 onward, the trajectory of the programme becomes more complex. While procurement continued, its alignment with national grid realities and broader energy sector reform objectives has increasingly come into question. The market context in which REIPPPP operates has fundamentally shifted: private procurement has accelerated, regulatory reforms have enabled bilateral trading, and the system is now constrained less by generation capacity than by transmission infrastructure. REIPPPP could still attract bids, but it could not reliably convert them into buildable, grid-connected capacity in the right places. It showed that without transmission expansion, faster permitting, and more flexible market structures, auctions can become a queue for scarce grid access rather than a true capacity-allocation mechanism.
Against this backdrop, the continued reliance on a centralised, government-backed procurement model for standard renewable energy technologies appears increasingly misaligned. Over the last couple of years wind and solar PV have become commercially viable and actively pursued by private buyers without the need for sovereign support. In effect, government intervention in this segment began to crowd into a space that the market was already capable of serving efficiently.
At the same time, the programme did not sufficiently adapt its design to reflect emerging system constraints. Grid capacity (particularly in high-resource areas) has become the binding constraint on new generation. Yet auction design continued to prioritise energy price competition without adequately incorporating locational signals, grid availability, or system value. The result has been procurement outcomes that are, at best, difficult to implement and, at worst, disconnected from the physical realities of the network.
This raises a more fundamental question: what should be the role of government-backed procurement in a maturing and increasingly liberalised electricity market?
In principle, state support should be directed toward areas where market failures persist or where system needs are not adequately met by private incentives alone. In South Africa’s case, this no longer applies to utility-scale wind and solar generation in isolation. Instead, the most pressing needs relate to transmission expansion, generation flexibility, and overall system resilience as the share of variable renewable energy increases.
Future iterations of REIPPPP (or any successor mechanism) should therefore pivot accordingly. Rather than continuing to procure energy on a technology-specific basis with full revenue certainty, the programme should focus on enabling investments that address system constraints and enhance market functionality.
This shift is particularly important in light of the anticipated implementation of the South African Wholesale Electricity Market (SAWEM). SAWEM aims to introduce competition, price discovery, and more dynamic system operation. However, the current REIPPPP structure, characterised by long-term, fully hedged contracts underpinned by government guarantees, effectively insulates participants from market signals. This creates a structural tension: on the one hand, policy seeks to promote competition; on the other, procurement design continues to remove exposure to price risk and operational incentives.
To align with SAWEM, procurement frameworks must evolve to encourage market participation rather than bypass it. This could include mechanisms that introduce partial merchant exposure, incentivise dispatchability and flexibility, or reward locational value. Without such changes, there is a risk that legacy procurement models will undermine the effectiveness of the market reform.
The argument against further REIPPPP rounds is not an argument against all government-backed procurement of capacity. There remain categories where the private sector will not step forward without a government-supported framework, and where the public benefit justifies the structure.
Gas peaker procurement is the clearest example. The private sector will not finance long-term peaker capacity against the merchant risk of an illiquid spot market. A REIPPPP-style structure (competitive, transparent, time-limited) is the appropriate vehicle. The same logic applies to the procurement of the ancillary services, which is rapidly gaining relevance and urgency.
Looking ahead, several priority areas emerge for the evolution of REIPPPP (or any successor mechanism).
First, procurement should become more targeted, focusing on transmission-constrained areas and integrating grid expansion planning. This may involve co-optimising generation and network investments or introducing location-specific bidding frameworks.
Second, greater emphasis should be placed on flexibility and system services. This includes battery energy storage, hybrid projects, and technologies capable of providing ancillary services such as frequency response and reserve capacity.
Third, contract structures should be redesigned to introduce appropriate levels of market exposure. This would support the development of SAWEM by encouraging generators to respond to price signals and participate actively in balancing and ancillary services markets.
Finally, government support should be used strategically to unlock investments that would not otherwise occur, particularly in grid infrastructure and system balancing, – rather than continuing to subsidise mature and commercially viable generation technologies.
REIPPPP has played a foundational role in South Africa’s energy transition. Its early success is undeniable. However, the conditions that justified its original design no longer fully apply. The next phase of reform requires a more nuanced and targeted approach, one that recognises the realities of grid constraints, leverages private sector capabilities, and aligns procurement with the objectives of a competitive and resilient electricity market.
