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When Will First-Price Work Well? The Impact of Anti-Corruption Rules on Photovoltaic Power Generation Procurement Auctions

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  • Peng Hao

    (College of Economics and Management, Tianjin Renai College, Tianjin 301636, China
    Current address: Tuanboxincheng, Boxueyuan, Jinghai District, Tianjin 301636, China.
    These authors contributed equally to this work.)

  • Jun-Peng Guo

    (College of Management and Economics, Tianjin University, Tianjin 300072, China
    These authors contributed equally to this work.)

  • Eoghan O’Neill

    (Energy Policy Research Group (EPRG), University of Cambridge, Cambridge CB2 1AG, UK
    Econometric Institute, Erasmus School of Economics, Erasmus University Rotterdam, 3062 Rotterdam, The Netherlands
    These authors contributed equally to this work.)

  • Yong-Heng Shi

    (College of Management and Economics, Tianjin University, Tianjin 300072, China
    These authors contributed equally to this work.)

Abstract

Along with the prevalence of photovoltaic (PV) procurement contracts, the corruption between auctioneers and potential electricity suppliers has attracted the attention of energy regulators. This study considers a corruption-proof environment wherein corruption is strictly suppressed. It elaborates a mechanism to explore the impact of corruption-proof measures on PV procurement auctions. It adopts incentive compatible constraints based on revelation principle to reflect PV firms’ optimal utilities. It employs first-price and first-score auctions and uses the Bayesian Nash equilibrium to provide a description of market outcomes. The results show that several strategies have different impacts on social welfare, PV firms’ utility, and the benefits of corruption. First, a first-price auction cannot act as a suitable policy because it may encourage corruption. Second, the first-score choice is desirable for social welfare to fit the forthcoming high-quality and low-price surroundings. Third, the first-score strategy maximizes PV firms’ utility and total income. The implications suggest that regulators ought not to employ first-price auctions in the future PV market from the perspective of social welfare. Another disadvantage of the first-price approach is that it enables the PV firm to maintain the utmost benefit from corruption.

Suggested Citation

  • Peng Hao & Jun-Peng Guo & Eoghan O’Neill & Yong-Heng Shi, 2023. "When Will First-Price Work Well? The Impact of Anti-Corruption Rules on Photovoltaic Power Generation Procurement Auctions," Sustainability, MDPI, vol. 15(4), pages 1-24, February.
    • Handle: RePEc:gam:jsusta:v:15:y:2023:i:4:p:3441-:d:1067245
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