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Different Cost Perspectives for Renewable Energy Support: Assessment of Technology-neutral and Discriminatory Auctions

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  • Jan Kreiss, Karl-Martin Ehrhart, Marie-Christin Haufe, and Emilie Rosenlund Soysal

Abstract

Auctions are the prevalent instrument for promoting renewable energy sources worldwide, especially in the European Union and in Latin America. Auctions enable the controlled deployment of renewable energy sources while reducing costs. However, there are different views on relevant costs, auction targets, and their implications on the auction design. Here, the application of technology-neutral auctions is an essential topic of discussion. We show that technology-neutral auctions are not a panacea. We analyze two types of discriminatory design elements that improve the expected auction outcome with respect to specific auction targets. By applying theoretical concepts to auctions for renewable energy support, we highlight how discriminatory auctions can prevent windfall profits and how to include an overall economic perspective in the auction design. We illustrate our results with real-world examples.

Suggested Citation

  • Jan Kreiss, Karl-Martin Ehrhart, Marie-Christin Haufe, and Emilie Rosenlund Soysal, 2021. "Different Cost Perspectives for Renewable Energy Support: Assessment of Technology-neutral and Discriminatory Auctions," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 1).
    • Handle: RePEc:aen:eeepjl:eeep10-1-kreiss
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    Cited by:

    1. Diniz, Bruno Andrade & Szklo, Alexandre & Tolmasquim, Maurício T. & Schaeffer, Roberto, 2023. "Delays in the construction of power plants from electricity auctions in Brazil," Energy Policy, Elsevier, vol. 175(C).
    2. del Río, Pablo & Kiefer, Christoph P., 2023. "Academic research on renewable electricity auctions: Taking stock and looking forward," Energy Policy, Elsevier, vol. 173(C).
    3. Diana Enescu & Alessandro Ciocia & Udayanga I. K. Galappaththi & Harsha Wickramasinghe & Francesco Alagna & Angela Amato & Francisco Díaz-González & Filippo Spertino & Valeria Cocina, 2023. "Energy Tariff Policies for Renewable Energy Development: Comparison between Selected European Countries and Sri Lanka," Energies, MDPI, vol. 16(4), pages 1-26, February.
    4. Anatolitis, Vasilios & Azanbayev, Alina & Fleck, Ann-Katrin, 2022. "How to design efficient renewable energy auctions? Empirical insights from Europe," Energy Policy, Elsevier, vol. 166(C).
    5. Mats Kröger & Karsten Neuhoff & Jörn C. Richstein, 2022. "Discriminatory Auction Design for Renewable Energy," Discussion Papers of DIW Berlin 2013, DIW Berlin, German Institute for Economic Research.
    6. Melliger, Marc, 2023. "Quantifying technology skewness in European multi-technology auctions and the effect of design elements and other driving factors," Energy Policy, Elsevier, vol. 175(C).

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    JEL classification:

    • F0 - International Economics - - General

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