Legal, Regulatory and Administrative Framework Development to procure new Renewable Energy capacity

CONTEXT

The government of Cabo Verde has launched an ambitious plan to further reduce the country’s dependence on imported fossil fuels. In 2008, the Council of Ministers approved the Cabo Verde National Energy Policy which sets out the overarching vision of achieving long-term independence from fossil fuels by promoting renewable energies and improving energy efficiency. In 2011, the government adopted a renewable energy law which allows IPPs to inject electricity from renewable energy sources into the national grid. The government is currently assessing the possibility of increasing the share of RE in the country’s overall electricity mix to 100% by 2020.

The basis for the electricity sector development foresees that any additional utility-scale RE generation capacity should be provided by Independent Power Producers (IPPs) through a competitive tendering process. However, the process is so far not fully defined and the underlying legal, regulatory and administrative (LRA) framework incomplete.

The Ministry of Tourism, Investment and Business Development (Ministério do Turismo, Investimento e Desenvolvimento Empresarial, MTIDE) is in charge of the energy sector in Cabo Verde and is planning to create the necessary conditions to develop a dynamic and transparent market for power production based on renewable energy technologies including storage facilities.

OBJECTIVES

The objective of the assignment was to support Ministério do Turismo Investimento e Desenvolvimento Empresarial (MTIDE) in the development of the legal, regulatory and administrative (LRA) framework for MTIDE to procure new renewable capacity. The LRA framework was adapted to the particular characteristics and to the legal system of Cabo Verde.

DESCRIPTION

Gesto assessed the current LRA framework of procuring RE capacity and conventional capacity in Cabo Verde, as well as, analyzed the key issues linked to the development of a new LRA framework, such as:

• Institutional arrangement, legal framework, governance and management structure of the power sector in Cabo Verde;
• Study and analysis of the background documents;
• Entities involved in the process and underlying LRA documents, and entities that manage and control the process or individual steps;
• Assessment of previous experiences with the implementation of IPP and PPP projects in Cabo Verde (Cabeolica in Santiago, S. Vicente, Sal and Boavista islands, APP in Sal island, AEB in Boavista island, etc);
• Evaluation of MTIDE human resources technical capacity and management availability to manage the process.

From the assessment above, Gesto developed a new tendering process for the procurement of RE capacity, align with the technical capacities and particularities of Cabo Verde. To do so, besides the initial assessment, Gesto developed an international benchmark of international best practices on LRA for competitive tendering process for IPP oriented RE power projects.

After definition and approval of the new procurement process, Gesto developed the necessary LRA documents for the implementation of the new LRA framework, which included:

• Request for Proposal (RfP) that will require substantial information input about the T+D grid and from buyer;
• Confidentiality agreement;
• Evaluation criteria and Score Card for EoI and RfP bid evaluation;
• Tender process time table;
• Land use agreement, e.g. usufruct agreement, with provision of incidental costs;
• Implementation agreement;
• Direct agreement, if full or partial sovereign guarantee is provided;
• Connection agreement with the offtakes;
• Power Purchasing Agreement (PPA);

Evaluation sheet of Engineering, Procuring and Construction (EPC) contract of the preferred bidder with its preferred EPC contractor.

SUMMARY OF SERVICES

• Review of Power Sector Planning Documents and Targets
• Benchmark and Best Practices
• Strategy definition
• Reference Pricing Data Collection
• Legal, Bid & financing/guarantee strategy
• Procurement flow chart and organizational alternatives
• Market Intelligence
• Drafting of LRA documents