Auctions for Renewable Energy Support II

Auctions are a competitive and market-based mechanism in energy policies across Europe. The AURES II consortium is investigating the potential of auctions to significantly improve the performance of renewable electricity support in Europe and provide suitable design options to harness this potential.

The technological maturity of many renewable energy sources (RESs) which resulted a significant cost reduction necessitates successful schemes for rationalising the overall support provided to them. Financial schemes such as auctions have the capacity to bring down support levels, drive down RES costs to levels close to fossil fuel-based electricity and increase the planning capability for RES deployment. However, cases of delay or non-realisation highlight the need for effective design tailored to different market conditions.

Evaluating RES auction challenges

The EU-funded AURES II project comes as a continuation of the AURES initiative aiming to promote efficient implementation of auctions to improve the performance of support for electricity from RESs in Europe. AURES ran from 2015-2017 and focused on the theoretical foundation of RES auctions, studying applications and providing activities for policymakers and other stakeholders. “In AURES II, we are monitoring the effects of RES auction implementation in detail and studying more innovative auction approaches, such as cross-border or technology-neutral auction formats,” explains project coordinator Vasilios Anatolitis.

Considering the variety of auction designs being introduced and tested in the EU market, there is a need to assess and improve their future applications. AURES II aims to communicate new insights on the applicability, performance and effects of specific auction designs, and to provide tailor-made policy support for different applications. Challenges such as the cross-border openings of auctions and the combination of several RES technologies in one auction are also being addressed.

Partners follow a multi-methodological approach that includes literature review, theoretical analysis, case studies, interviews, surveys, and empirical and quantitative methods. Central to the AURES II approach is the strong involvement of relevant stakeholders, including policymakers and industry representatives.

Development of auction tools

AURES II monitors EU auctions in a continuous manner and results appear in a holistic database on the project website. Among the project achievements so far is the auction designer, the first interactive tool that answers the most important questions on auction scheme design. In addition, quantification of the impact of different auction designs on the business case of a single project is possible through the cash flow model.

AURES II aims to provide more empirical evidence on auctions and identify best practices by conducting case studies in 12 EU and non-EU countries. Through practical cooperation with relevant institutions in several countries, AURES II will help implement and monitor the respective RES auctions.

Impact on RES

Project partners will produce both theoretical and empirical evidence on the effects of auctions on innovation, financing costs and on RES value chains, and help comprehend the impact of the competitive pressure. The initiative will support countries in conducting joint RES auctions, such as in the case of Denmark and Germany, as well as evaluate the feasibility of multi-technology auctions.

The AURES project demonstrated that for auctions to successfully contribute to achieving effective and efficient RES deployment, they have to be specifically designed to match the market environment and take into account a multitude of parameters. As Mr Anatolitis emphasises, “stakeholders must make sure to adapt auctions to the specific situation, secure sufficient competition and provide abundant information to maintain investor certainty.”

Reference source: Auctions for Renewable Energy Support II