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Design of multi-attribute procurement auction for the Korean clean hydrogen power generation auction market

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  • Sim, Jisu
  • Jung, Jihyeok
  • Lee, Deok-Joo
  • Yoon, Kiho

Abstract

This paper presents a procurement auction mechanism for the Korean clean hydrogen power generation auction market, addressing the limitations of the existing auction design. We design a multi-attribute auction framework with a Vickrey-score sealed-bid auction rule consisting of scoring, allocation, and payment rules, allowing sellers to bid on both price and non-price attributes. We adopt the hydrogen co-firing rate and capacity factor as non-price attributes to comprehensively evaluate the contributions to greenhouse gas reduction and fuel supply reliability. Through equilibrium analysis, we demonstrate that the proposed mechanism induces a weakly dominant bidding strategy for sellers. This strategy leads to optimal price bids based on their levelized cost of energy (LCOE) and independently determined non-price attributes. Numerical analysis using real-world parameters from the Korean hydrogen industry highlights the importance of carefully structuring the score function. Moreover, the results confirm that the proposed auction mechanism achieves higher market efficiency and a greater share of clean hydrogen in fuel usage compared to single-attribute price-only auctions.

Suggested Citation

  • Sim, Jisu & Jung, Jihyeok & Lee, Deok-Joo & Yoon, Kiho, 2025. "Design of multi-attribute procurement auction for the Korean clean hydrogen power generation auction market," Energy Economics, Elsevier, vol. 150(C).
    • Handle: RePEc:eee:eneeco:v:150:y:2025:i:c:s014098832500698x
    DOI: 10.1016/j.eneco.2025.108871
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    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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