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Consultancy services regulatory framework for development of renewable energy resources

Assignment to develop a regulatory framework in Lesotho.

Description of project:

The objective of the assignment is to develop an appropriate regulatory framework that will support sustained investment in renewable energy resources in the country. In this context, the main services under the contract include the development of: regulatory framework guidelines and legal instruments; principles underlying the determination of tariffs for renewable energy; power purchase agreement (PPA) framework guidelines; guidelines for the procurement of power; model documents for licensing renewable generation projects; guidelines for the procurement of power in line with the existing regulations.

ÅF's services:

1) Task 1 – Development of power producers (PPs) framework guidelines and legal instruments

  • Local market oriented power generation schemes: Purchase Obligation; Renewable Energy Power Generator Qualification Criteria; Basis for the Determination of applicable tariffs; Rights and Obligations of Qualified Renewable Energy Power Generator; Roles and responsibilities  of the Regulator; Rights and Obligations on the Renewable Energy Purchasing Agency (REPA); Predictability and identification of all cost/risk allocation principles; Network access arrangements; Procedures in assessing solicited/unsolicited bids; Templates for MoUs, implementation agreements, and related ones with key clauses; Possible Government financial securities and credit enhancement arrangements; Recommended level of Debt/Equity ratio per technology; Monitoring, Reporting and Review; Terminations; and, Resolutions of Disputes and Remedies.


  • Export oriented schemes: Assessment procedures and key requirements; and, templates for MoUs, implementation agreements, etc., with key clauses (including, levels of taxes, royalties, etc.).

2) Task 2 – Principles for Generation Tariff Determination and Development of Economic and Financial Model

The task has two components:

  • to provide, in detail, the principles underlying the determination of generation tariffs for renewable energy, taking account the objectives of economic efficiency and financial viability in assuring adequate return on investment; and
  • to develop an all-encompassing economic and financial model capable of modelling the technical and operational characteristics of  all the various renewable energy resources available in Lesotho by technology types for assessing the economic and financial merits of renewable energy projects, and providing basis of tariff determination.

3) Task 3 - Development of Power Purchase Agreements Guidelines and legal instruments

The guidelines addressed the following key issues: The financial and legal structures of the PPA; triggers for re-negotiating PPAs; arbitration of disputes and risk allocation; the obligations of the off-takers and the power producers; and, key clauses of the PPAs.

4) Task 4 - Development of licensing models

Preparation of model documents for:

  • Local oriented schemes;
  • Export oriented schemes.

5) Task 5 - development of guidelines for the procurement of power

Develop model document for procurement of power from IPPs. Evaluation of the advantages and disadvantages of LEC as the single buyer of electricity produced in-country or imported. Role of the Distribution Companies or municipality/local government.

6) Task 6 – Workshops and seminars.

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