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Efficient Promotion of Renewable Energy with Reverse Auctions

Author

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  • Sebastian Schäfer

    (University of Siegen)

  • Lisa Schulten

    (University of Siegen)

Abstract

Despite negative experiences with auctioning off subsidies for renewable energy in some countries, tenders are increasingly used today. We develop a reverse auction which accounts for particularities of intermittent renewable energy sources. Determining the quantity, demanded by the regulator, is internalized and directly linked to his two main objectives. On the one hand, the regulator seeks for a high share of renewable energy. On the other hand, he wants to enhance burden sharing between electricity consumers and renewable electricity producers. We further account for asymmetric information in reverse auctions. We analyze incentives for bidders to manipulate the auction outcome and adapt the design to prevent this behavior. Regional features as grid and generating capacity can be considered to optimize the deployment of renewable energy. We thereby introduce a link to fossil capacity auctions.

Suggested Citation

  • Sebastian Schäfer & Lisa Schulten, 2015. "Efficient Promotion of Renewable Energy with Reverse Auctions," MAGKS Papers on Economics 201520, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    • Handle: RePEc:mar:magkse:201520
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    File URL: http://www.uni-marburg.de/fb02/makro/forschung/magkspapers/paper_2015/20-2015_schaefer.pdf
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    References listed on IDEAS

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    Cited by:

    1. Cassetta, Ernesto & Monarca, Umberto & Nava, Consuelo Rubina & Meleo, Linda, 2017. "Is the answer blowin' in the wind (auctions)? An assessment of the Italian support scheme," Energy Policy, Elsevier, vol. 110(C), pages 662-674.
    2. Cassetta, Ernesto & Meleo, Linda & Monarca, Umberto & Nava, Consuelo R., 2017. "Is the answer blowin' in the wind (auctions)? An assessment of Italian auction procedures to promote onshore wind energy," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201709, University of Turin.

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    More about this item

    Keywords

    Auction Design; Tendering; Renewable Energy; Adverse Selection; Moral Hazard; Burden Sharing;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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