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Auction Schemes, Bidding Strategies and the Cost-Optimal Level of Promoting Renewable Electricity in Germany

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Abstract

Germany is among the leading countries regarding the promotion of renewable energy towards a sus-tainable energy system transition. In this paper, we investigate the German pilot auction scheme for solar photovoltaics introduced in the Renewable Energies Act 2014 (EEG 2104) that serves as a pilot for the auction-based promotion of the three major large-scale renewable electricity generation technol-ogies (wind, solar, biomass) after 2017. A strategic bidding model is used to determine the optimal bidding strategy and to determine the resulting project value. We consider pay-as-bid and uniform pric-ing and single and multiple bids. Moreover, we investigate the impact of investment cost uncertainty. In a sensitivity analysis we show how bid strategy adjustments affect the outcome. Specifically, higher uncertainty regarding the market clearing price increases the project value, as this additional uncertainty can be used to raise the probability of obtaining a higher level of remuneration by an adjusted auction strategy. The first-price auction can generate additional profits by placing a second, higher bid with a low probability of success. Investment cost uncertainty can have either a positive or negative impact on the project value, depending on the auction parameter values chosen.

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  • Voss, Andreas & Madlener, Reinhard, 2015. "Auction Schemes, Bidding Strategies and the Cost-Optimal Level of Promoting Renewable Electricity in Germany," FCN Working Papers 19/2015, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  • Handle: RePEc:ris:fcnwpa:2015_019
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    1. repec:gam:jsusta:v:9:y:2017:i:10:p:1895-:d:115723 is not listed on IDEAS
    2. Walgern, Julia & Peters, Lennart & Madlener, Reinhard, 2017. "Economic Evaluation of Maintenance Strategies for Offshore Wind Turbines Based on Condition Monitoring Systems," FCN Working Papers 8/2017, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    3. repec:gam:jeners:v:12:y:2019:i:19:p:3616-:d:269624 is not listed on IDEAS
    4. Brown, David P. & Eckert, Andrew, 2018. "Imperfect Competition in Electricity Markets with Renewable Generation: The Role of Renewable Compensation Policies," Working Papers 2018-12, University of Alberta, Department of Economics.
    5. repec:eee:rensus:v:91:y:2018:i:c:p:272-286 is not listed on IDEAS
    6. repec:eee:enepol:v:125:y:2019:i:c:p:20-32 is not listed on IDEAS
    7. repec:eee:rensus:v:99:y:2019:i:c:p:212-219 is not listed on IDEAS

    More about this item

    Keywords

    Renewable energy; pay-as-bid auction; uniform pricing auction; feed-in tariff; Germany;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • P47 - Economic Systems - - Other Economic Systems - - - Performance and Prospects
    • 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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