Traditionally, electricity generation contracts in developing countries have been quietly negotiated out of the public eye, resulting in bad deals for utilities and their consumers. Competitive procurement forces all potential electricity suppliers to publicly and transparently bid against one another, forcing energy prices lower. As the practice of competitive procurement takes hold in countries around the world, governments are increasingly paying less for electricity and are seeing marked increases in the level of grid-connected renewable energy, demonstrating the increasing economic competitiveness of sources such as wind and solar.

Competitive procurement helps facilitate private investment by giving investors—especially U.S. investors that must be compliant with the Foreign Corrupt Practices Act (FCPA)—confidence that energy projects will be judged transparently and awarded using fair contracting practices. This level of transparency also benefits local consumers and utilities, allowing access to cleaner, less expensive sources of energy.

Record Low Prices

Since 2016, USAID has worked with an extremely diverse group of countries to develop the policy and regulatory environments necessary for instituting competitive electricity procurement. In Mexico, USAID helped the government bring 7 GW of renewable energy online resulting in $8 billion in planned investment, $1 billion of which came from American companies. USAID support also allowed both Kazakhstan and Afghanistan, two countries known for their vested interests and security issues respectively, to hold their first renewable energy competitive procurements. Similar USAID support in Africa has resulted in record low prices for renewable power in Senegal and Zambia.

Competitive procurement can result in prices that more closely reflect drastic changes in technology, financing and other costs. For example, solar PV’s global average price fell by over 70 percent between 2010 and 2017. Similarly, the increasing experience by project developers and manufacturers, combined with a higher familiarity with renewable energy technologies by insurers and multilateral and commercial lenders, brings the renewable energy industry increasingly into the mainstream.

Private Investment Boosts Energy Security in Colombia

Colombia has historically relied on its rivers for cheap and plentiful hydropower for its country’s electricity needs. As hydropower becomes increasingly unreliable due to El Nino, energy diversification has become a critical energy security issue. Fortunately, Colombia is also rich in renewable energy resources with some of the highest wind and solar potential in Latin America. The most important barrier to developing renewable energy is attracting the necessary level of private investment. Competitive procurement provides a solution by offering stable, long-term contracts to generators who in turn compete to deliver the lowest price to the Colombian energy utilities.

In late 2018, USAID helped organize events in Bogota and New York City to showcase the Colombian business opportunity to a network of U.S. and global firms. The Colombian Ministry of Mines and Energy (MME) presented its procurement plans to 90 investors and financial organizations in Bogota and 60 attendees in New York to educate them and increase their interest in bidding in the auction. As a result of USAID support, in less than one year, MME has guaranteed 2,250 MW of installed RE capacity and leveraged over $2B of estimated private investment into Colombia’s energy sector.

USAID Technical Leadership

USAID offers multi-day educational workshops and training opportunities for energy sector stakeholders interested in designing and developing competitive procurement. Experts speak on past renewable energy experience and introduce the legal, financial, and regulatory processes. USAID conducted a workshop in Tanzania in 2016 with participation from the Ministry of Energy and Minerals (MEM) and nine other government agencies. In 2017, USAID brought a delegation from Tanzania to Brazil for a ten-day study tour, which included an auction simulation and visits to the principal stakeholders, government entities, and private sector companies involved in Brazil’s auctions. In 2018, Tanzania announced plans to initiate its first competitive procurement for wind and solar energy.

Featured USAID Implementation Activities

• UPME

  Colombia

  2018–Ongoing

  Reverse Energy Auction Design Support

  USAID is helping Colombia develop policy, regulatory, and business environments to procure renewable energy through auctions. The auction represents an opportunity to bring low-cost renewable energy, while promoting investment in Colombia’s energy sector. Visit the website

• Makpal Abduldinova / USAID

  Kazakhstan

  2017–Ongoing

  Energy Auctions for Kazakhstan’s Green Economy

  Despite being a fossil fuel-based economy with a surplus of energy, Kazakhstan has a successful renewable energy auction program that is transforming its energy sector and diversifying its energy mix. Visit the website

• UPME

  Mexico

  2013–2018

  Institutional Framework for Auctions

  Mexico has implemented a major restructuring of its power sector which, with assistance from USAID, resulted in some of the world’s most competitive renewable energy prices. Visit the website