AURES, a European funded research project on auctions for renewable energy support (RES) in the EU, has published a report on Auctions for Renewable Energy Support: Lessons Learnt from International Experiences. The report considers the main trends, experiences and lessons learnt from renewable energy auctions in eight EU and four non-EU countries. “One of our key findings is that setting penalties does not guarantee project realisation. We see that pre-qualification requirements, such as a proof of a building permit, play a crucial role for selecting realisable projects, especially when dealing with unexperienced bidders,” said Fabian Wigand, consultant at Ecofys, a lead partner for this AURES consortium report.
The general objective of AURES is to promote an effective use and efficient implementation of auctions to improve the performance of electricity from renewable energy sources in Europe. In one of its ten work-streams, AURES analysed case studies on auctions for renewable electricity in eight EU countries (Denmark, France, Germany, Ireland, Italy, Netherlands, Portugal, UK) as well as Brazil, China, South Africa and California.
There is limited experience with using auctions for RES but, according to the European Commission State Aid Guidelines for Environmental Protection and Energy 2014-2020, by January 2017 all EU Member States seeking state-aid clearance shall set up competitive bidding process to grant support to all new installations, with only very few exceptions. As of March 2016, eight Member States had introduced auction schemes for at least some technologies and another seven are considering their introduction before 2020.
The AURES report presents the main trends in auction design against four criteria (policy effectiveness, static efficiency, actor diversity, and dynamic efficiency), and derives lessons that will serve as input for the formulation of specific recommendations in later work packages.
There are a number of general lessons drawn from the case studies analysed. An effective auction depends on the existence of competition, which is to a large extent related to structural issues (number and nature of players, market concentration, types of products being offered, and specific regulations) and auction design (anticipation of volume, transparent rules and low access barriers). The regulatory and administrative framework for RES is also important, for instance the availability of permitting and spatial planning, as is appropriate infrastructure for project development in locations with high RES potentials (e.g. grid connection). Good communication about auction rules is also important as this may lead to a high number of ineligible bids.
In addition, the report draws a list of specific lessons regarding the auction procedure and remuneration (auction format, frequency, ceiling price, auction volume, bid evaluation criteria, pricing rule, awardee contract or remuneration), lessons regarding eligibility requirements (pre-qualification requirements, location and project size requirements) and lessons regarding project realisation.
The study also highlights the importance to tailor auction design to the national policy objectives and the market environment. Moreover, target fulfilment, price reduction and actor diversity can be conflicting objectives, so the design needs to reflect the policy preferences, as well as the local level of competition and project development cycles.
