USAID has identified the competitive procurement of renewable energy capacity as one of the building blocks being employed by countries that are successfully scaling up renewable energy. Scaling up RE requires that new energy generation solutions are affordable to the end-user and that the private sector is willing and able to invest to the largest extent feasible. Competition in procurement, from competitive tender to reverse auctions, supports these outcomes in two ways. First, they result in a more transparent procurement process, particularly when replacing directly negotiated independent power producer (IPP) transactions. Transparency in technical, financial, legal, and regulatory terms reduces investor risk and increases competition. Second, with proper auction program design, they enable competitive pressure to drive down energy prices. Coupled with falling capital costs, in many cases reverse auctions have significantly contributed to solar and wind levelized cost of electricity approaching or even besting fossil fuel sources. These cheaper prices allow utilities and ultimately the end user to pay less for electricity supplied by RE, which increases the appetite for utilities and the public to purchase more RE capacity.
Auctions use the power of competition to drive down the price of RE, and have been in consideration by the Government of Kazakhstan. This task will help GOK to use the best emerging practices globally to obtain the lowest possible renewable electricity prices.
Tetra Tech will utilize its flexible, and highly contextualized, auction design and implementation methodology which has delivered more than 4500 MW of new RE capacity in Mexico and El Salvador. “Power the Future” program will work with champions at KEGOC and decision-makers from KEGOC, KOREM and the MOE to build on their interest and reforms to support the introduction of auctions.