Planning and Finance How CERs give project developers a competitive advantage under the REIPPP

The South African government has pledged to reduce its total annual GHG emissions by 34% below its business-as-usual trajectory by 2020. One of the incentive instruments the government has put in place to realise this objective is the REIPPP, a competitive bidding process whereby the lowest bidders are awarded long term power purchase agreements at the offered price in R/MWh. One way of improving a project's competitive edge is via the cross subsidising of its REIPPP bidding price with the revenue stream from the sale of CERs it can generate under the CDM. Now that the third bidding round under the REIPPP is in full swing and rounds 4, 5 and 6 have been announced, project developers are investigating all possible avenues to find a competitive edge. Cross subsidising will allow a project to bid at a price that is between 9% and 27% lower than it would be able to do without the CER revenue stream. Registering a REIPPP project under the CDM therefore becomes a must if a project wants to stand any chance in the competitive bidding process