2. Extensive experience of financing RE
projects
EBRD Renewable projects since inception to 2017
• 146 projects in 29 countries
• 6,838 MW of renewable capacity
• More than EUR 4bn of EBRD investment
• Approximate project value of EUR 14bn
MW total is greater than totals shown on map due to regional projects not
projects not included and other minor adjustments.
Albania
303 MW large hydro
30 MW small hydro Armenia
25 MW large hydro
38 MW small hydro
Azerbaijan
153 MW large hydro
Bosnia and
Herzegovina
26 MW large
hydro
Bulgaria
26 MW small hydro
216 MW wind
Croatia
1 MW biomass
Cyprus
12 MW solar
Egypt
750 MW solar
Estonia
20 MW biomass
293 MW wind
FYR Macedonia
23 MW small hydro
Georgia
395 MW large hydro
11 MW small hydro
20 MW wind
Greece
48 MW wind
40 MW solar & wind
Hungary
158 MW wind
Jordan
265 MW solar
127 MW wind
Kazakhstan
24 MW large hydro
100 MW solar
51 MW wind
Latvia
27 MW large hydro
Mongolia
155 MW wind
Montenegro
4 MW hydro
72 MW wind
Poland
130 MW biomass
875 MW wind
Romania
210 MW large hydro
50 MW solar
557 MW wind
Serbia
2 MW biogas
4 MW biomass
23 MW small hydro
263 MW wind
Tajikistan
16 MW large hydro
Turkey
190 MW geothermal
278 MW wind
Ukraine
4 MW biogas
18 MW biomass
184 MW large hydro
4 MW small hydro
59 MW solar
79 MW wind
Morocco
120 MW wind
Russian Federation
40 MW geothermal
336 MW large hydro
3. Renewables – Operational Approach
Investment
Technical
cooperation
Policy
dialogue
• Promoting sustainable energy
• Honest broker role
• Sharing experience and best practice
• Development equity
• Mezzanine
• Project finance
• Corporate loan
• Equity
• RE Frameworks
• Small Financing
Facilities
• PPA drafting
• Grid absorption studies
• Regulatory frameworks
3
4. EBRD has been supporting countries on the
transition to renewable energy auctions
Joint EBRD and Energy Community Secretariat
Policy Guidelines on Competitive Selection and
Support for Renewable Energy, prepared in
collaboration with IRENA.
These Guidelines are divided into four broad areas
– namely:
(1) the overall framework for the competitive
process;
(2) choices relating to what is being procured;
(3) choices relating to the selection process; and
(4) the mechanism for the delivery of RE support.
Underpins EBRD technical assistance to policy
makers
Planned and ongoing assistance on auction design
and/or implementation in: Albania, Egypt, North
Macedonia, Lebanon, Moldova, Mongolia, Serbia,
and Turkey.
4
5. 21 February, 2019
Good for consumers
• energy at the lowest price
Good for the authorities
• transparent and objective selection process and
price determination
• control over budget, timing and location
Good for industry
• lower regulatory risk (is the price “right”?)
• stable and long-term high volume business
5
Why Auctions?
8. 21 February, 2019 8
Four key elements
Project
Well-designed
auctions
Grid availability
Overall strategy - MWh
9. 21 February, 2019 9
A supportive policy framework is needed alongside
well-designed auctions
Supportive policy
framework
• Policy commitment
• Long-term and medium
term RE targets
• Schedule of RE
auctions
• Clear and credible
institutional
arrangements
• Robust legislative and
contractual framework
Well-designed auctions
• What is being procured
(location, volume,
technology)?
• Who is eligible?
• How will projects be
selected?
• How to promote project
delivery?
• How will support be
provided?
10. 21 February, 2019 10
Lowest
cost
Implementation
certainty
Strict penalties
for non
implementation
Prequalification
conditions
Auction projects
at advanced
stage
Multiple bidders
Low barriers to
entry
Price-only
criterion
Reasonable
penalties for non
implementation
Robust
Contracts
What influences auction outcomes?
11. 21 February, 2019 11
Auction design – timeline
Pre-bidding stage
- Selection
• Clearly specify
auction parameters
(what, where,
when, how)
• Ensure bidders are
credible and well
qualified to deliver
– use qualification
criteria on technical
and financial
capacity
• Specify key support
arrangements
(offtaker, grid
connection,
contracts, etc.)
• Bid bonds - avoid
need for strict
financial
qualification
Bidding stage
• Streamlined and
transparent process
• Single sealed bid
process for clarity,
transparency,
simplicity and lower
administrative costs
• Choose winning
bid(s) exclusively
on price for
transparency and
simplicity
• Level of support
should be pay-as-
bid for simplicity
Post-bidding stage
- Delivery
• Clear deadlines
and schedule of
penalties for non-
compliance &
monitoring of
project progress –
use of completion
bonds higher than
bid bonds to
provide incentives
for completion
13. Some auction and policy framework
design choices
21 February, 2019 13
1. Institutional arrangements
2. Setting volumes and timelines
3. What to procure
4. Offtake arrangements
5. How is support provided
6. Promoting project delivery
7. Qualification requirements
8. Financial evaluation
9. Balancing responsibility
14. Institutional arrangements
21 February, 2019 14
• Which entities: (1) set overall policy (targets, auction schedule);
(2) organise and supervise auctions; and (3) contract with
winners?
Issue
• Consider roles of different institutions
Discussion
• All institutional roles need to be clearly specified
• Institutions need to be credible (transparent administrator,
credit-worthy offtaker, etc.)
• Choice will depend on local context
Recommendation
15. Setting volumes and timelines
21 February, 2019 15
• How to set a long-term plan for auctions?
Issue
• Goal – what is the long-term goal: share of electricity
generation, share of energy consumption, shares of
technologies?
• Establish annual quotas linked to long-term goals
• How to capture regional constraints and ambitions?
Discussion
• Set a long-term target and rolling timeframe
• Identify grid constraints and availability
• Address grid constraints through: (1) nodal quotas; (2)
locational pricing; or (3) connection costs
Recommendation
16. What to procure
21 February, 2019 16
• How much is being procured and where?
Issue
• Capacity – how many MW?
• Projects – how many projects?
• Sizes – maximum or minimum size limits?
• Land – developer or government chooses?
• Grid connection – whose responsibility?
Discussion
• Set capacity, number of projects, and size restrictions to
balance economies of scale, attract diverse participants,
promote competition and meet legal obligations
• Considering establishing caps (for example – for first round, no
project larger than XX MW)
• Small projects supported through administratively set FiT
Recommendation
17. Offtaker arrangements
21 February, 2019 17
• Arrangements for power purchase
Issue
• Power purchase: what is needed for financing?
Discussion
• Robust PPA based on existing model with longer tenure
• Clear and credible funding structure for offtaker
• Visibility over future offtake arrangements in case of sector
reforms
Recommendation
18. How should support be provided
21 February, 2019 18
• How should support be provided to projects?
Issue
• Interaction with market reform
• Adoption of CfDs
Discussion
• Support: PPA with fixed price per delivered kWh
• Transition to CfDs when electricity markets are liquid and
accessible to market participants
• Ensure bidders have visibility over transition arrangements
Recommendation
19. Promoting project delivery
21 February, 2019 19
• How to promote project delivery by winning bidders?
Issue
• Project requirements – permits, land, grid connection, technical
characteristics.
• Bidder requirements – experience, financial standing, absence
of legal concerns?
• Financial guarantees – bid bonds, completion bonds
Discussion
• Facilitate permitting, grid connection and land access to allow
advanced stage projects
• Specify bidder requirements to balance credibility and
competition
• Use financial guarantees to promote credible bids and provide
incentives for delivery
Recommendation
20. Financial evaluation
21 February, 2019 20
• How should the financial proposals be evaluated?
Issue
• Complexity – simple tender or descending auction?
• Support level – pay-as-bid or marginal price?
Discussion
• Use a simple auction procedure in early stages of the transition
to auctions
• Use pay-as-bid in early stages of the transition to auctions
• Use price as the sole evaluation criteria to selected between all
qualifying bidders
Recommendation
21. Balancing responsibility
21 February, 2019 21
• How should balancing costs for intermittent RE sources be
recovered?
Issue
• Should intermittent RE have balancing responsibility?
Discussion
• Introduce balancing responsibility when intraday and balancing
markets are liquid and readily accessible by RE producers
• Include clear criteria for establishing liquidity of markets
(including institutional responsibility)
Recommendation
22. Contact
21 February 2019 21
Adil Hanif
Principal Banker, Policy
Energy and Natural Resources
Tel: + 44 20 7338 7287
Email: hanifa@ebrd.com
EBRD
One Exchange Square
London, EC2A 2JN UK
www.ebrd.com
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