The future of REI4P: Evolving beyond least-cost

On March 5, 2025, a dynamic panel discussion at Solar Power Africa delved into the future of South Africa's Renewable Energy Independent Power Producers Procurement Programme (REI4P) and its pivotal role in bolstering energy security and driving economic growth. The conversation featured insights from industry leaders from different parts of the system and value chain (EPC, advisory, IPP): Richard Doyle (JUWI South Africa; moderator), Mercia Grimbeek (IB Vogt), Chanda Nxumalo (Harmattan Renewables), and Daniel Goldstuck (Sustainable Power Generation).

Since its launch in 2011, SA’s REI4P has played a catalytic role in developing the country’s renewable energy market. The programme has procured 12 GW from seven bid rounds, attracted over R250 billion in investment, reduced renewable energy costs, and integrated large-scale renewables into the grid. It has also developed a highly skilled workforce and strengthened SA’s expertise in utility-scale renewables.

Despite these successes, South Africa is still facing an energy crisis. Grid constraints have become a major bottleneck to adding new renewable generation, while delays in project rollouts have slowed progress toward energy security. While REI4P has allowed Eskom to procure electricity at well below the WEPS (Wholesale Electricity Pricing System) tariff, these savings offer little mitigation for energy users and consumer tariffs have continued to rise at well above inflation. Earlier this year, SA’s Electricity Minister reported that tariffs are now 180% higher than a decade ago. 

Localisation efforts aimed at leveraging government procurement to create jobs have also fallen short. REI4P aimed to stimulate local manufacturing and industrialisation, but bid window delays have seen almost all investments in local supply chains being liquidated before they were able to become sustainable. Several factories set up to support REI4P (by Jinko, SMA, AEG and others) shut down due to inconsistent demand and lack of sustained procurement.

Going forward, REI4P must evolve its relevance, shifting from a market-creation model to a programme that is more agile and focuses on optimisation - actively strengthening energy security, accelerating capacity expansion, and ensuring electrons get onto the grid -- fast. Beyond this, it should also, ideally, stimulate economic development, drive job creation, and advance the just energy transition.

1. Streamline bidding and accelerate project rollouts

   REI4P’s paper-intensive and expensive bid process results in slow project deployment, while delays in bid windows increase costs, prevent job creation, and contribute to energy insecurity. A 2022 Meridian Economics study found that delays in REI4P rollout since 2016 led to a 96.5% reduction in potential renewable capacity, a shortfall that could have nearly prevented load shedding. An automated auction system and pre-auditing should be introduced to speed up approvals and enable faster, more predictable bid rounds for bankable projects, not just least-cost ones. Predictability is critical for building a strong renewable energy value chain and supporting long-term job creation. The recent introduction of import tariffs on PV panels and components cannot by itself drive industrial growth. 

2. Rethink risk mitigation mechanisms

   Many of the early risk-reduction measures embedded in REI4P are now outdated, as the renewable energy market has matured, investor confidence has grown, and risk perception has declined significantly since 2011. Bid Window 8 will likely be shaped by the Integrated Resource Plan 2025, which is expected soon. The recent reduction of the sovereign guarantee to 80% in Bid Window 7 signals a clear shift in risk allocation.

3. Structural changes to the REI4P

   Structural changes to REI4P should also be considered. As South Africa looks to evolve the programme, there is an opportunity to rethink its approach within a broader global context. Until now, US policy has shaped much of our renewable energy framework, but alternative models from India, Brazil, and other emerging economies should be investigated. These countries have successfully integrated large-scale renewables using different procurement and policy models, often balancing affordability with local economic participation. South Africa aligns more closely with these markets, and drawing on their experiences could help refine REI4P to be more competitive, flexible, and responsive to the country’s unique energy challenges.

   In addition to revisiting global best practices, structural adjustments within the programme itself could further improve its effectiveness. Solar and wind (and BESS) could potentially be co-located instead of being separated into different bid rounds by technology. There is significant potential for a model that supports smaller projects or even regional (or municipal) bid windows, potentially under a feed-in tariff (FIT) rather than a competitive auction. The municipal-level impact could be substantial. With IPP Office support, municipalities could streamline renewables procurement, reducing inconsistencies across NERSA tariff structures and procurement processes. Standardisation would improve efficiency, reduce costs, and accelerate deployment.

   4. Expanding battery storage in REI4P to ease grid constraints. 

   South Africa needs 5 GW of new capacity annually, but grid is a major constraint. Battery energy storage (BESS) is a cost-effective solution, yet no tenders outside the Risk Mitigation IPP Procurement Programme (RMIPPPP) have called for dispatchable power. As BESS becomes more competitive, grid defection among residential and commercial users is rising, posing risks for Eskom and municipalities but also opportunities. Rather than investing in expensive power lines, municipalities could deploy solar and batteries for localised energy security. With IPP Office support, the government could help municipalities plan and procure smaller-scale electrification projects.

   5. Increasing South African ownership

   Beyond technical improvements, increasing South African ownership of projects must be a priority. Most REI4P projects rely on commercial debt, with much of the equity held by foreign investors with access to low-cost debt. Only a few South African investors, such as Old Mutual, PIC, SOLA, H1, Reatile, Pele, hold equity in these projects. Expanding local equity participation would ensure that a greater share of economic value remains within the country, fostering local enterprise development and long-term industry sustainability.

   Beyond the government’s role in reforming REI4P, the renewable energy sector itself must step up. The industry must become more coordinated, strategic, and proactive in shaping its own future and that of the country’s energy transition. 

To this end, the renewable energy sector may need a charter similar to that of the mining industry or, at the very least, a broader industry-wide strategy. Currently, the sector is fragmented, with companies competing over a limited market instead of collaborating to make the pie bigger. Industry associations struggle to gain strong backing from market leaders, which has weakened their ability to advocate for consistent policy and regulatory support. Without a more united approach, short-term commercial interests will continue to override the need for long-term strategic vision.

Minister Gwede Mantashe’s call for the sector to speak with one voice when engaging with the government is sensible. The mining sector provides a model of how industries can successfully coordinate skills development, localisation, and enterprise development by aligning their efforts.

At the heart of this challenge is skills development and workforce planning. Renewable energy companies have been hesitant to invest in local skills development due to low and uncertain tariffs, which have made long-term workforce planning difficult. However, with an overarching industry plan and greater policy certainty, companies would be in a stronger position to hire, train, and invest in community enterprises. Rather than focusing solely on short-term project gains, the sector must prioritise long-term industry sustainability and strengthen the entire renewable energy ecosystem.

Another critical area is enterprise development (ED) and socioeconomic development (SED) spending, which also requires better coordination. Currently, projects operate independently within a 50km radius model, leading to fragmented spending rather than a unified, strategic approach. A nationally coordinated REI4P fund, contributed to by all projects, could focus on large-scale, high-impact initiatives. For instance, expanding SARETEC’s role in driving skills development nationally could help accelerate training programmes and ensure South Africa has the workforce needed for a growing renewables sector.

To maximise long-term impact, the industry must rethink how ED and SED funds are allocated to ensure local communities genuinely benefit from REI4P’s success. Instead of piecemeal, project-specific investments, a coordinated approach could create a more resilient, long-term economic foundation for South Africa’s renewable energy sector.

SA’s energy landscape has changed significantly since REI4P was launched in 2011. The programme has delivered enormous value, but it must now evolve to meet new priorities. We need a government procurement programme with projects that close faster, add generation capacity and grow the economy.

At the same time, as a sector, we need to take responsibility for the energy transition and for deepening our own impact. Better coordination, more local ownership and a strong commitment to skills and enterprise development are essential. Together, we can shape the next iteration of a REI4P that balances energy security, affordability, and local benefit.