SAEP_SOO_-_revised.pdf

SECTION C – STATEMENT OF OBJECTIVES

C.1 Introduction

The objective of USAID’s Southern Africa Energy Program (SAEP) is to increase electricity availability and access in Southern Africa.1 This is to be done by facilitating transactions and strengthening the enabling environment for public and private sector investment in the power sector. SAEP will address five (5) key constraints to such investment: i) ineffective regulation, planning and procurement for energy; ii) low commercial viability of utilities; iii) limited regional harmonization and cross border electricity trade; iv) lack of demonstrated and scaled clean and renewable energy and energy efficiency technologies and practices, and v) weak institutional and human resource capacity for energy sector management.

C.2 Power Africa

On June 30, 2013, President Obama launched Power Africa, a whole-of-U.S. government (USG)2 effort to stimulate economic growth in Sub-Saharan Africa (SAA) by increasing the availability of and access to electricity, while mitigating long-term greenhouse gas (GHG) emissions trajectories. Power Africa is implementing the following three pillars which are laid out in the Power Africa Roadmap3:

1. Generation at Scale – Achieving over 30,000 MW of new generation capacity in SSA by

2. Grid-Based and Off-Grid Connections – Adding at least 60 million new connections in SSA to double the number of connections by 2030

3. Unlocking Energy Potential – Focusing on enablers that seal and sustain power deals, including supporting policy interventions to move transactions forward and regional power systems to unlock generation

Overall methodologies for achieving these goals under these pillars across SSA include:

1 Southern Africa includes the following Southern Africa Development Community (SADC) Member States:

Angola, Botswana, Lesotho, Madagascar, Malawi, Mozambique, Namibia, South Africa, Swaziland, Zambia, and Zimbabwe. Assistance to Zimbabwe is currently subject to numerous U.S. Government legal and policy restrictions.

It is not currently anticipated that SAEP will implement activities in Zimbabwe. Any activities proposed for Zimbabwe will need to receive USG policy and legal clearance prior to implementation. It is also anticipated that Mozambique will have separate energy program, so bilateral activities in Mozambique will not be a focus of SAEP.

However, regional activities involving Mozambique are expected.

2 Twelve USG agencies and departments collaborate in the implementation of Power Africa: USAID, Overseas Private Investment Corporation (“OPIC”), U.S. Export‐Import Bank (“Ex‐Im”), Millennium Challenge Corporation (“MCC”), U.S. Trade and Development Agency (“USTDA”), U.S. African Development Foundation (“USADF”), the Department of Commerce (“DOC”), the Department of Energy (“DOE”), the Department of Treasury (“Treasury”), the Department of State (“DOS”), the Department of Agriculture (“DOA”), and the U.S. Army Corp of Engineers (“USACE”).

3 See: https://www.usaid.gov/powerafrica/roadmap https://www.usaid.gov/powerafrica/roadmap

● Improving policy environments, and the legal and regulatory frameworks related to the electricity sector and natural gas;

● Improving the quality of electricity distribution and transmission services and the technical and financial performance of electricity sector institutions;

● Improving the use of data and analytic tools for decision-making in the electricity sector;

● Improving electricity sector planning, including integrated resources planning, low emissions planning, and long-term planning;

● Increasing the use of clean and renewable sources of energy for electricity generation, leading to an associated increase in avoided GHG and a corresponding reduction in long-term emissions trajectories;

● Ensuring energy resources are responsive to the needs of end-users in all communities and populations including large consumers and especially women and underserved populations; and

● Increasing cross-border and regional electricity trade by expanding the number of countries sustainably engaged in such trade.

Power Africa takes a transaction-centered approach4 designed to overcome constraints that hinder the sustainable development of the power sector and limit public and private sector investment opportunities. Power Africa focuses on completing individual power sector transactions quickly and cost-effectively by attracting private investment and helping countries make critical power sector reforms. In so doing, Power Africa seeks to: (1) create and maintain functional power systems that meet demand, remain financially solvent, attract private and public investment, and provide quality service to end-users; and (2) ensure that the power sector contributes optimally to a country’s national and regional agenda for environmental, economic, and social development.

Partnership is at the heart of Power Africa’s strategy, which aims to achieve its goals by leveraging the collective resources of three different types of organizations: development and strategic partners, including multilateral finance institutions, bilateral aid agencies, and U.S.

government agencies that provide direct support for power sector transactions; more than 100 private sector partners including developers, project developers/sponsors, financiers, equipment

4 A transaction is defined as one of the project types below:

● Electricity generation, transmission, or distribution investment of any scale;

● Energy efficiency investment in the electricity sector;

● Electricity investment powered by a renewable source of energy such as wind, solar, hydro, geothermal, or biomass;

● Investment that increases access to electricity through the use of small isolated electricity grids or no electricity grid especially in underserved rural areas;

● Gas pipeline or associated infrastructure investment used for electricity generation;

● Investment to capture associated gas or reduce gas flaring, to increase gas power generation;

● Gas investment that will eventually support gas-fired power generation; or

● Fuel cell power investment (i.e., one that uses the chemical energy of hydrogen or another fuel to cleanly and efficiently produce electricity).

suppliers, and industry associations; and African governments that help create the enabling environment necessary for power sector transactions to move forward.5

USAID coordinates the interagency implementation of Power Africa and serves as the primary deliverer of USG technical assistance and transaction support to advance its goals.

USAID/Southern Africa’s Southern Africa Energy Program (SAEP) will serve as USAID’s primary mechanism for providing technical assistance and transaction support to increase electricity availability and access in Southern Africa under Power Africa. As such, activities must be aligned to Power Africa’s goals and approach.

C.3 Background

The lack of sufficient, widely accessible, affordable and reliable electricity is one of the largest obstacles to achieving and sustaining poverty-reducing levels of economic growth in Southern Africa. The region has huge untapped energy resources, including natural gas, among the largest hydro and solar potential in the world, and significant wind and biomass potential.

However, despite billions of dollars being earmarked for energy from institutional investors, multilateral and regional development banks, and private banks, investment remains well below potential. The below were identified as constraints to energy sector development in Southern Africa where donor assistance could make an impact.

Regional Constraints

Greater regional integration holds numerous advantages for harnessing Southern Africa’s energy resources. Benefits include: allowing demand centers in the south to import less expensive electricity from hydro-rich countries further north, improving security and reliability of supply by utilizing a greater mix of resources and sharing reserve margins across countries, allowing for the development of larger-scale regional projects which require investments that cannot be justified based on national demand of the resource-owning country alone, and creating a larger market so countries with small power sectors can benefit from economies of scale. Regional cooperation and integration is a key priority for the South Africa Development Community (SADC), and strategies and institutions have been created to establish a regional energy architecture. However, integration remains shallow for a number of reasons:

● Regional Dependence on South Africa: South Africa has 44,000 MW of installed capacity while every other country in the region has a much smaller market, ranging from 70 MW to 2,500 MW. Historically, countries in the region have relied on South Africa’s excess generation to supply them with cheap electricity through bilateral agreements. Since 2008, however, demand has exceeded supply, with South Africa repeatedly engaging in load-shedding for both itself and its neighbors. As a result, most countries in the region have resorted to demand suppression programs. Many of the region’s power trade agreements are

5For additional information on the Power Africa approach and strategy, see the Power Africa Roadmap:

https://www.usaid.gov/sites/default/files/documents/1860/power-africa-roadmap-v2.pdf set to expire in the next five years, and many are not expected to be renewed, causing countries to focus more on energy independence rather than regional integration. However, given its market size and government credibility, South Africa is still seen as a necessary off-taker, without which it would not be possible to finance the region’s large-scale generation and transmission projects.

● Weak Institutions: The four primary regional energy institutions for SADC – the Southern

Africa Power Pool (SAPP), the Regional Electricity Regulators Association (RERA), the SADC Secretariat’s Energy Division, and the new Southern African Center for Renewable Energy and Energy Efficiency (SACREEE) – are hindered by lack of staff, insufficient funding, and sometimes lack of authority to effectively carry out their mandates.

● Limited Regional Harmonization and Market Trade: To date, regional standards, policies and frameworks – such as a regional grid code and regional investment frameworks -- have either not been created or have not been fully implemented. Energy trade continues to rely heavily on long-term bilateral agreements between countries, with less than optimal use of market mechanisms. While governments are beginning to take steps to facilitate regional power market development, the national energy strategies of most countries continue to focus on energy independence or becoming a net-exporter. Further development of regional power trade, however, would allow Southern African nations to harness larger-scale, more cost-effective energy sources, thereby reducing energy system costs and improving reliability.

● Weak Project Preparation: A number of potentially transformational regional generation and transmission projects that can integrate the region physically have been prioritized by SAPP, SADC energy ministers, and the African Union, under its Program for Infrastructure Development in Africa. However, most have failed to move forward as scheduled due to early-stage obstacles, in part due to the scarcity of skills for project preparation.

National Constraints

● Weak Regulation, Planning and Procurement: Numerous funds and developers are targeting energy in the region, but few countries in SADC provide policy and procedural certainty needed by potential investors to mobilize these resources efficiently. Countries often do not have adequate policies on renewable energy or private sector participation in the energy sector. Energy sector planning, when done, is often disconnected from actual procurement and has tended to be fragmented rather than integrated, often focusing on expanding generation to meet aggregated demand forecasts without taking into account the need to invest in more efficient transmission and distribution of electricity. Countries in the region have little or no experience with independent power producers (IPPs), Public-Private Partnerships (PPPs) and competitive procurement and so, when confronted with power proposals, they have few standardized processes for analyzing and ranking the proposals’ technical and commercial merits.

South Africa’s Renewable Energy Independent Power Procurement program (RE IPPP) demonstrates how quickly and effectively private sector resources can be mobilized when a transparent, standardized, and competitive procurement process is used. Within the first two-and-a-half years of bidding, the RE IPPP awarded a total of 64 projects which will generate nearly 4,000 MW, with investment totaling US$14 billion being committed, all while dramatically reducing prices for solar and wind.

● Absence of Commercially Viable Utilities: The power sector in SADC is dominated by vertically integrated, state-owned power utilities that are not commercially viable enterprises due to a combination of non-cost-reflective tariffs, high technical and commercial losses and inefficient operations. Unable to recover costs, maintain system assets or invest in new infrastructure to meet growth in demand, power utilities frequently create a large fiscal burden on national budgets as governments move resources away from other public services, such as health and education, to subsidize the inefficiencies of utility operations. Without a credit-worthy off-taker, the private sector requires guarantees or other credit enhancements (either from the government or a third party) in order to meet the risk parameters required to finance energy projects, which governments are often unwilling or unable to provide.

● Lack of Demonstrated and Scaled Renewable Energy and Energy Efficiency Technologies and Practices: The intermittent nature of most renewable resources creates technical challenges related to resource mapping, grid integration, technical standards, and energy storage. While developed countries have created solutions to some of these challenges, few have yet been successfully scaled in the context of the Southern African region. Similarly, while renewables offer promise for off-grid or mini-grid systems where low population density makes grid extension economically unviable, the absence of proven, scalable business models in Southern Africa has limited private sector investment. Energy efficiency and demand-side management are increasing getting attention in light of rising electricity tariffs, but few countries yet have robust policies, standards, or appropriate financing structures in place.

● Limited Human and Institutional Capacity: Many institutions that are responsible for incentivizing or implementing energy projects in the region are new and/or have limited experience, particularly in key areas such as project finance and structuring bankable power projects. As a result there are an insufficient number of professionals with the appropriate background and experience in Southern Africa. There is almost universal agreement that low capacity among energy stakeholders is a fundamental constraint to expanding both private sector investment in energy and lower carbon technologies in the region.

C.4 Scope

The purpose of this contract is to increase electricity availability and access in Southern Africa, including through facilitating increased megawatts and connections. This will be done by removing barriers to private sector transactions and strengthening the enabling environment for public and private sector investment in the power sector. While the contract focuses on promoting on-grid and off-grid renewable energy power generation, it also seeks to improve utility performance and expand and strengthen transmission and distribution infrastructure so that capacity reaches consumers, improving efficiency of supply and demand. Wherever possible, enabling environment issues will be addressed and will focus on those issues that impact the entire value chain. This will involve supporting the development and implementation of integrated resource planning and regulatory and policy reforms, improving the investment climate, building the capacity of host government institutions, strengthening utilities, reducing their losses, and expanding cross-border electricity trade.

C.5 Sustainability

The premise underlying the implementation of this program is that private sector investment and public policy reforms are critical to expanding electricity access and achieving sustainable growth in Southern Africa’s power sector. Successfully reaching generation and access goals requires concurrent diligence in creating and maintaining a sound and sustainable climate for investment and governance. The Contractor must focus its efforts on key enabling factors to facilitate private sector participation, promote electricity trade, advance commercially viable distribution to end-users, promote investor confidence, and ensure that power sector improvements contribute to a country’s broader development goals. The following principles (at a minimum) must be reflected in the Contractors’ approach to achieving the stated results in C.6 below:

Strong and Transparent Legal and Regulatory Frameworks that Facilitate both Public and Private Investment in the Power Sector

Creating and maintaining an effective enabling environment requires strong and transparent regulatory frameworks. These frameworks should include regulatory institutions that are autonomous, possess clear authority to fulfill their mandates, and remain accountable for their decisions and actions. Such regulatory frameworks should also establish and maintain clear relationships and lines of accountability between power sector institutions and the regulators.

The frameworks should also clarify important regulatory aspects, including pricing, land rights, purchasing arrangements, and performance standards to reduce investor risks while contributing to other public policy objectives, such as environmental protection and universal access.

Creditworthy Purchasers

Limited investor confidence in the creditworthiness of electricity purchasers can hinder power sector development. Efficient and financially solvent purchasers mitigate investor risk and encourage private sector participation.

Cost-Reflective Retail Tariff Structures

Investments in the power sector will prove sustainable if the tariff structure accurately reflects costs and risks, and provides a reasonable rate of return that encourages continued private sector engagement. In many instances, this must be carefully balanced against the critical need to protect consumers, ensure affordability, and expand electricity access. Cost-reflective tariffs often take time to achieve. Many different approaches exist to structure the retail tariff system depending on the best fit for a particular country or context. In general, effective tariff management strategies include public engagement, transparent processes, regular adjustment, and appropriate measures to ensure affordability.

Technical and Commercial Efficiency

Improving technical and commercial efficiency in the electricity sector presents opportunities to deliver more services to more consumers, lower costs throughout the supply chain, and strengthen the quality and commercial viability of service delivery. Efficiency can be improved through infrastructure maintenance, metering, bill collection, and consumer education interventions.

Clear and Transparent Procurement Processes

Procurement processes that integrate international best practices such as fair and competitive bidding, life-cycle cost analysis, and best-value determination will increase investor confidence, lower costs, and facilitate sustainable and longer-term investments.

Sound, Strategic, and Integrated Power Sector Planning

Sound, strategic, and integrated power sector planning helps ensure the development of a resilient and least-cost power system that can continue to meet demand over time. Planning activities should include integration with other development goals; meet forecasted demand and reserve requirements; identify an optimal proportion of energy sources to meet expected electricity loads; and consider the need for new or extended transmission and distribution infrastructure, energy efficiency measures, and off-grid access measures.

Streamlined and Transparent Processes for Project Development

Overly complex procedures for mobilizing electricity projects often hinder development.

Streamlining and clearly communicating the steps required for common components of project development such as land acquisition, feasibility studies, and standards compliance lowers transaction costs and helps private sector actors navigate and accelerate through these processes.

Increased Clean and Cleaner Energy Sources Based on Local Contexts

Employing clean energy technologies is crucial for diversifying electricity markets, increasing energy security and resilience, expanding off-grid electricity access, and mitigating environmental impacts.

Strong Regional Power System Integration of Interconnected Utilities

Functional regional power exchange agreements facilitate cross-border electricity trade, create economies of scale, and present opportunities to harness regional energy resources at lower costs. The extent to which participating governments and operators can define a common legal and regulatory framework is critical to the success of regional power exchange agreements.

Formal agreements should clearly define utilities’ contractual rights, ownership of assets, and basic principles covering the technical planning, operations, and commercial aspects of regional power system integration.

Universal Electricity Access, Achieved through the Strategic Use of On-grid, Off-grid, and Small-Scale Electricity Access Measures

National investments in new power generation should respond to the demand of key market sectors, including industrial, commercial, and urban residential consumers, while expanding access to low income and rural off-grid communities. This includes meeting the power needs of public sector facilities such as schools, health centers, and other community buildings.

Interventions to support universal access should strategically consider a mix of on-grid, off-grid, and small-scale energy resources. Activities also could include strengthening or creating rural electrification agencies, establishing targeted cross-subsidies, implementing feed-in tariffs, implementing energy efficiency programs, and promoting the development of a functional commercial market for distributed energy resources.

Environmental and Social Soundness Aligned with International Best Practices

The environmental and social soundness of power sector projects are critical to the success and sustainability of the investments supported by this IDIQ Contract. Meaningful efforts to identify and mitigate risks, including stakeholder consultations, should begin at the earliest stages of project development and continue throughout project implementation in a transparent and inclusive manner. Demonstrated commitment to environmental and social sustainability is evidenced by the adoption and application of national laws and regulations and international best practices.

Gender Equality and Female Empowerment

Advancing gender equality and female empowerment is a key tenet underlying U.S. foreign policy and development assistance. The human development and economic growth opportunities that arise from growth in the power sector often do not offer equal participation and impact between men and women. Electricity related projects, programs, and policies that explicitly recognize imbalances and intentionally strive to reduce inequities and foster effective engagement of everyone result in better outcomes in terms of the sustainability of the power sector and human development opportunities.

C.6 Results

The Contractor will work with the relevant governments, the private sector, donors and other partners in Southern Africa to expand investment in energy, including renewable and gas, and energy efficient technologies. It will do so by improving the overall enabling environment, by helping to bring new on-grid and off-grid power generation and transmission and distribution projects to financial close, and by adding direct new connections. Specific transactions will be selected, with USAID’s approval, based on respective country’s needs to ensure the ultimate sustainability and cost-effectiveness of projects.6

At the same time, the Contractor must achieve each the following outcomes in at least three (3) countries within the implementation period of the SAEP:

● Improved regulation, planning and procurement for energy;

● Improved commercial viability of utilities;

● Improved regional harmonization and cross border trade;

● Renewable energy and energy efficiency technologies and practices locally demonstrated and scaled; and

● Increased human and institutional capacity

While each of the above outcomes should be achieved in multiple countries, all outcomes do not have to be achieved within the same countries.

At the regional level, the Contractor must also achieve the following outcomes within the implementation period of SAEP:

● Increased regional harmonization of energy policies, frameworks, plans, rules and/or regulations

● Strengthened regional energy institutions

As these outcomes are a subset of the “Improved regulation, planning and procurement for energy”, “Improved regional harmonization and cross border trade”, and “Increased human and institutional capacity,” they will be treated as such in the below discussion of expected results.

At least 30% percent of the dollar value of SAEP must focus on renewable energy, energy efficiency, and related activities, in line with USAID’s Global Climate Change clean energy requirements laid out in the USAID Climate Change Strategy7.

In achieving the expected outcomes, the contractor will:

● Harness Political Will: Identify, engage and provide technical assistance in countries where policies and prior actions demonstrate a commitment to reform and where a champion exists to lead energy sector reform efforts.

● Leverage Local Resources: Leverage local technical and financial resources within South Africa and other countries in the region to build lasting capacity in Southern Africa. This includes, but is not limited to: utilizing local firms and institutions in implementation, maximizing the use of local expertise, mobilizing existing investment funds for the region, and facilitating practitioners to share experience and lessons learned.

6 See Attachment for definition of Power Africa Qualified Transactions.

7 http://pdf.usaid.gov/pdf_docs/PDACS780.pdf

● Promote Cleaner Energy: Mitigate the release of current and future GHG emissions by supporting “cleaner” electricity development, such as renewable energy technologies like wind and solar, energy efficiency technologies, efficient natural gas-fired power plants, and technologies that displace the reliance on diesel fuel for electricity generation. SAEP will not support activities associated with the procurement or implementation of coal or nuclear power projects.

● Tell the Story: Develop and deliver a robust communications and outreach strategy that will effectively communicate SAEP goals, programs, and results to both internal and external audiences using a variety of media. Provide clear, concise and timely reports meeting counterpart and USG requirements, including data on quantitative and qualitative indicators, that best capture and tell the USG story in the field.

● Integrate Gender: Integrate gender in activities implemented under SAEP. As appropriate, impact and indicator data will be disaggregated by gender. All project activities will be structured to integrate gender and identify and address gender constraints and concerns in the provision of training and technical assistance.

● Collaborate Closely with Partners: Collaborate closely with all partners in the region that are involved in the energy sector and those that contribute to Power Africa, including USG agencies as well as partners from among donors, multilateral institutions, private sector companies, and financial institutions.

The Contractor is highly encouraged to propose outcomes that go beyond the minimum expected results set out below.

Outcome 1: Improved Regulation, Planning and Procurement for Energy

The Contractor must provide a combination of technical assistance and transaction support to government institutions, regulators, utilities and other entities to create the regulatory and procedural certainty needed by potential investors to mobilize public and private resources for generation, transmission, and distribution projects. Such projects can be either on-grid or off-grid. Wherever possible, the Contractor will link its legal, regulatory and enabling environment reform and capacity building support to ongoing transactions which will create an increased incentive for change. .

Illustrative Interventions:

● Increase regional harmonization of energy policies, frameworks, plans, rules and regulations;

● Technical assistance for the development and review of integrated resource plans;

● Technical assistance and analysis to assist in preparation of integrated power systems, transmission, or distribution master plans that look at the entire value chain.

● Technical assistance and analysis on the development of electrification strategies, including cost-effective grid extension, micro-grid and off-grid opportunities.

● Technical assistance to improve the design, implementation, and evaluation of tenders and/or standardized procurement programs for IPP, PPP and Energy Performance Contract (EPC) generation, transmission and distribution projects in line with international best practice (See Outcome 4 below).

Minimum Expected Results:

● Improved energy planning implemented and institutionalized in line with international best practice in at least three (3) countries

● Standard IPP tendering procedures developed and implemented in at least three (3) countries, with projects brought to financial close.

● Standard Power Purchase Agreements (PPAs) developed and implemented for intermittent renewables and other generation technologies in at least 3 countries, with projects brought to financial close.

● Energy sector enabling policy environment and legal and regulatory frameworks improved in at least three (3) countries.

● Institutions (such as, but not limited to, Rural Electrification Agencies) in at least two (2) countries with improved planning, transparency in operations, and/or enhanced management skills to effectively accelerate electrification.

● Legal and regulatory framework for natural gas development improved in at least one (1) country.

Outcome 2: Improved Commercial Viability of Utilities

The Contractor must provide technical assistance to utilities, regulators, and host-country governments to move utilities towards improved commercial performance and creditworthiness.

As a broad range of factors contributes to the sub-optimal performance of utilities and distribution companies, technical assistance can include activities designed to drive operational, technical, and financial performance improvements, strengthen independent regulatory bodies, and where appropriate, assist with reform and restructuring of the power sector. While the Contractor may assist utilities with the design and implementation of new technologies as part of a utility’s strategy, SAEP will not directly fund commodity procurement on behalf of the utility.

The Contractor will also work at the highest levels of government to obtain the buy-in and support of decision makers for power sector and utility reform.

Illustrative Interventions:

● Develop a high-level working group with senior government officials and representatives from the private sector and finance community to develop an action plan for power sector reform and turning around the national utility.

● Technical assistance for power sector reform and restructuring, including introducing private sector participation, as appropriate.

● Technical assistance for improving utility corporate governance and establishing commercialization policies and practices.

● Technical assistance in setting cost-reflective tariffs that provide incentives for loss reduction and good corporate governance of utilities and the design and implementation of effective subsidy and social safety net programs consistent with government policy priorities.

● Design, testing and evaluating new technologies and approaches to customer regularization and metering.

● Technical assistance and analysis to assist an electric utility to design and implement a comprehensive loss reduction program to reduce technical, non-technical, and collection losses.

● Prepare cost-of-service studies and provide technical assistance on the preparation of utilities’ tariff application to the regulatory agency.

● Support the development of public education and outreach programs necessary to explain and garner support for reform efforts.

● Support the revision of national grid codes.

● Technical, commercial and/or collection losses in utility and/or other distribution companies reduced in at least three (3) countries.

● Operational performance of utilities improved in at least three (3) countries.

● Long-term loss reduction capital investment plan with financing options developed and adopted by regulators and utilities in at least three (3) countries.

● Cost-reflective tariff setting and subsidies formulation schemes developed and capacity of regulators and utilities to implement such schemes increased in at least 3 countries.

● Framework developed with at least three (3) utilities that provides pathway to improved creditworthiness.

Outcome 3: Improved Regional Harmonization and Cross Border Trade

The Contractor must work with countries and regional energy institutions – such as SAPP, RERA, the SADC Secretariat’s Energy Division, and SACREEE – to help put in place the legal and regulatory frameworks necessary for a regional market to be developed, improve regional generation and transmission planning, and the capacity of national entities to engage in cross border trade. The Contractor will also work with SAPP to help it more effectively carry out its mandate.

Illustrative Interventions:

● Legal, regulatory and technical assistance to support cross-border electricity trade in SAPP, including support for regional transmission system planning, assistance for the design and implementation of regional generation and transmission infrastructure, and establishment of regulatory and governance frameworks for trade and related services.

● Provide technical support to SAPP and member utilities to help SAPP become a more functional regional power pool and market

● Technical assistance to support the development of wheeling agreements and tariffs.

● Provide technical and regulatory support to harmonize energy policies, frameworks, plans, rules and/or regulations in support of cross border trade such as the development of a common system of accounts and adopt a regional grid code.

● Strengthen the capacity of national utilities to engage in cross-border electricity trade

Minimum expected results:

● National and regional transmission system planning improved in at least four (4) member countries

● At least four two (2) regional harmonization frameworks developed and implemented in collaboration with regional energy institutions such as the Regional Electricity Regulators Association (RERA), the Southern Africa Power Pool (SAPP), and SADC. At least one such framework or mechanism should directly support increased power trade.

● Standard processes and agreements for long and short term power trade and related energy services and wheeling tariffs developed or improved

● SAPP trading framework improved

● SAPP capacity to efficiently schedule and reschedule transactions due to changing system conditions improved

● Capacity of utilities and transmission companies enhanced in at least three (3) countries to engage in cross border electricity trade

● At least one regional energy institution strengthened.

Outcome 4: Renewable Energy and Energy Efficiency Technologies and Practices Locally Demonstrated and Scaled

In Southern Africa, the Power Africa Transactions Tracker (PATT)8 lists slightly over 9,000 MW of power generation projects and the Power Africa Roadmap9 establishes for Southern Africa an ambitious target of 8-10 million new connections; 5-6 million on grid and 3-4 million off-grid. The Contractor must assist countries in adopting and scaling renewable energy and energy efficiency technologies and practices that are new or still being established in the region.

While other energy activities should be considered, at least 30%10 of the total investment should focus on renewable energy. Activities under this outcome will take an appropriate transaction support approach to contribute to Power Africa’s MW and connections goals. Special focus must be placed on developing and ramping up grid and off-grid renewable energy solutions.

Illustrative Interventions:

● Provide technical and transaction advisory services (i.e., technical, legal, financial, and/or regulatory) to host country governments and off-takers to assist in project pipeline development, project identification, screening, feasibility and pre-feasibility assessment and design; and the negotiation of private energy power projects and related agreements necessary to bring energy transactions to financial close, among others.

● Provide independent financial modelling, financial advisory and financial arrangement services to governments, electric utilities, developers, investors, and lenders to bring

8 The PATT can be accessed via an app for the iPhone at: https://itunes.apple.com/app/patt/id1039913424?mt=8 .

Note that implementers are required to report on the PATT for all transaction support.

9 See: https://www.usaid.gov/powerafrica/roadmap 10 This percentage is subject to change and must be monitored closely discussed with the Contracting Officer’s Representative as part of the selection of activities.

https://itunes.apple.com/app/patt/id1039913424?mt=8 transactions to financial close.

● Provide high-quality legal advice to governments, regulatory agencies, electric utilities, and developers, investors, and lenders (as appropriate) in structuring transactions and negotiating IPP and PPP power project agreements.

● Technical assistance to national utilities or municipalities on development and deployment of smart grid systems where applicable.

● Technical assistance to utilities on management and integration of intermittent resources.

● Technical assistance in developing energy efficiency standards

● Technical assistance to regional and local financial institutions to better understand and evaluate on and off-grid renewable energy and energy efficiency projects and more effectively assess and invest in such projects, drawing on lessons learned from SME and micro-lending institutions

● Technical assistance to rural electrification agencies to support and advance grid distributed generation, as well as off-grid, micro-grid, and small-scale lighting solutions

● Technical assistance to ministries, energy commissions, regulatory agencies, and utilities in designing and executing demand side management and energy efficiency programs.

Minimum expected results:

● At least 1,000 MW of new on-grid and off-grid renewable power generation projects brought to financial close as a result of Contractor assistance.

● At least 3 Million new connections added in Southern Africa as a result of Contractor assistance.

● Capacity of utilities and transmission companies enhanced to manage electricity distribution and transmission services and intermittent power sources in at least three (3) countries.

● Regulations supporting grid-tied and/or off-grid distributed generation promulgated or optimized in at least two (2) countries.

● Energy efficiency programs, technologies, practices or standards implemented and scaled in at least three (3) countries.

● Demand side management programs, technologies, practices or standards implemented in at least three (3) countries.

Outcome 5: Increased Human and Institutional Capacity

The Contractor must support human resource strengthening in public and private sector institutions as a means of improving the quality and sustainability of chosen interventions in the previous four outcomes, as well as sharing experience and expertise more broadly across the region. Peer-to-peer learning opportunities can be particularly effective and will be integrated into approaches to achieving this outcome. To promote sustainable learning, emphasis will also be given to embedding capacity building activities within existing Southern African institutions, or drawing upon expertise that already exists in the region

Illustrative Interventions:

● Conduct technical, financial, and non-technical trainings for professionals in the energy sector.

● Initiate partnerships with U.S. institutions (such as utilities, the National Association of Regulatory Utility Commissioners, U.S. Energy Association, National Rural Electricity Cooperatives Association, US National laboratories, or universities) as well as other local, regional and global partners in developing training materials or curricula, conducting study tours and exchanges, twinning programs, and or embedding of experts.

● Establish a power sector leader’s development and coaching program on technical, power sector reform and change management issues.

● Capacity among public sector officials improved to implement energy planning and procurement in line with international best practice in at least 3 countries.

● Regular, international standard training programs on energy and power sector issues established in at least six (6) institutions in Southern Africa. Sustainable regional training program for regulators developed in collaboration with RERA.

● At least two (2) multi-year peer-to-peer learning programs supported.

● At least five (5) partnerships established between Southern African institutions and utilities, regulatory associations, research institutions or universities from within and/or outside the region in support of achieving outcomes 1-4 Institutional capacity of at least two (2) regional institutions strengthened.

C.7 Grants Under Contract: Catalyzing Local Opportunities Fund

SAEP will include a Catalyzing Local Opportunities Fund (hereinafter, “the Fund”) as a Grants Under Contract (GUC) tool that the Contractor may use to facilitate achievement of the expected outcomes above. The purpose of the Fund is to be a flexible means to encourage partnership and/or collaboration of local entities towards addressing obstacles to unlocking greater investment in the power sector and in increasing energy access.

Illustrative activities might include supporting South African institutions to share their experience and expertise with other countries in the region, partnering with a leading university to training staff and support curriculum development at other universities, or working with industry associations to address regulatory obstacles.

GUC funds, however, shall not be used for feasibility studies, transaction-specific project preparation activities (such as assessments or analyses), or scientific research as such support is already being provided by other USG agencies, USAID mechanisms and/or Power Africa partners available in Southern Africa. Funds, nevertheless, may be used to provide seed funding to promote innovative business models or entrepreneurs that will increase electricity access to underserved communities and have the potential to be replicated.

The Contractor must have a clear plan for the effective use of the Fund and is expected to propose how it will use the Fund to catalyze local opportunities. Grants Under Contract issued must follow an approved Grants Under Contract manual and can only be administered following

USAID’s review and approval. The Contractor may award grants in combination with technical assistance, training, and/or other activity inputs toward achievement of specific objectives that respond to expressed local needs and contribute to achievement of stated grant results. Grants Under Contract must be structured to encourage leveraged funding from other non-USG resources, either as matching grants or as parallel funding of similar activities that support the achievement of common results.

GUC should constitute approximately 10% of the overall contract value over the life of the contract.

C.7 Coordination with Host Country Governments, Power Africa Partners, USG Agencies and Other Donors

As SAEP contributes directly to key priorities in Southern Africa’s regional energy plans and frameworks, the Contractor must work closely with regional energy institutions and host country governments. Project implementation shall also be coordinated closely with Power Africa leadership and participating USG agencies.11 Finally, project design and implementation shall be coordinated with assistance provided by donors in the region, including but not limited to the World Bank, African Development Bank, the Government of Sweden, the UK’s Department for International Development (DfID), KfW, and the European Union. While SAEP will not directly provide financing for transactions, it is expected that the Contractor collaborate closely with other USG agencies and donors to draw upon their financing tools and facilities.

Furthermore, South Africa has financial institutions with substantial funds for investment in country and in region (such as the Development Bank of South Africa, the Industrial Development Corporation, and the Public Investment Corporation), as well as strong technical expertise in the form of advisory firms, universities, and research institutions. There are significant opportunities to leverage South Africa’s resources – financial, technical, and academic – for the benefit of other countries.

The Contractor must avoid duplication and maximize synergies with other projects in the sector that may be launched during the life of this contract. In furtherance of USAID Forward capacity building goals, the Contractor shall partner with local implementing organizations and build local institutions that can continue to provide leadership in the region after the conclusion of the contract.

C.8 Place of Performance

The contract will be performed primarily in Southern Africa. Initial countries targeted for assistance will be selected upon inception of the program in collaboration with USAID. The Contractor must propose a list of target countries to USAID and receive USAID’s approval prior to commencing activities in the respective countries. While it expected that choice of countries

11 The capabilities of USG agencies can be found in the Power Africa Toolbox:

https://www.usaid.gov/powerafrica/toolbox might change or be expanded over the course of the contract, such changes must receive USAID approval. As resources allocated to the SAEP are limited, the contractor shall focus on countries that demonstrate political will to implement energy sector reform.

C.9 Monitoring and Evaluation

The Contractor’s performance monitoring and evaluation plan (PMEP) must permit efficient and timely measurement of progress towards outputs and outcome indicators for each result and sub-result. The contractor must include the required and standard Global Climate Change and Power Africa indicators set forth in the annex. The Performance Indicator Reference Sheets in the Global Climate Change Indicator Handbook (updated on June 10, 2015)12 provide definitions and other relevant information for the Required and Standard Indicators. A Power Africa Indicator Handbook is under development and will be provided to the Contractor upon award.

Transaction monitoring will be required as per Power Africa guidelines.

Additional custom indicators that align with the Contractor’s approach and logical framework for the contract must be added to the table for inclusion in the final PMEP. The contractor must develop performance standards, including monitoring methods, performance levels, and aggressive but achievable targets for all proposed interventions. The Contractor must also identify sources and collect baseline data for all interventions as part of the PMEP. The PMEP detailing all indicators must be approved by the USAID Contracting Officer’s Representative and reviewed annually as part of reporting and the work plan approval process.

C.10 Gender

Improving electricity service can benefit both men and women although the exact dynamics of the nexus between gender and energy is dependent on local conditions and gender relations, and is not always well understood.

Gender issues that shall be taken into account during design and implementation of SAEP include but are not limited to:

a. Inequalities in education, skills and mobility, as well as the prevailing social norms, which may limit the participation of women in electricity sector activities;

b. General lack of awareness of the gender implications of policy decisions affecting access to and price of electricity;

c. Male dominated culture in electricity utilities and other Government agencies with oversight of electricity services.

Expected impacts of the program on closing gender gaps and prevention of unintended negative consequences include:

a. Increased access by women to modern electricity services that will enhance their social and economic opportunities;

12 The Global Climate Change Indicator Handbook can be found at: http://pdf.usaid.gov/pdf_docs/PA00K4VT.pdf

b. Increased number of women trained in fields associated with electricity sector reform, e.g. policy making, utility management, regulation, etc.

c. Increased employment opportunities by women at electricity utilities…