Renewable energy auctions are increasingly becoming a policy tool of choice to support renewable energy deployment, according to a new guide released on Monday by the International Renewable Energy Agency (IRENA).
The guidebook ‘Renewable Energy Auctions: a Guide to Design’, finds that more than 60 countries have now adopted renewable energy auctions, up from six in 2005, largely due to their ability to attract competition and drive down costs.
IRENA Director-General Adnan Z. Amin said: “In an era of rapidly declining costs and growing deployment in renewable energy, policies are being adapted to maintain efficiency and effectiveness. In this context, one of the most significant recent policy developments is the growing popularity of renewable energy auctions.”
Auctions in S.Africa and UAE
The guide analyses auction design elements and highlights best practices for policy makers and investors considering auctions in their own countries. It finds that auctions around the world attract investment and decrease costs through competition.
In South Africa, for example, the Renewable Energy Independent Power Producer Procurement (REIPPP) programme committed to multiple bidding rounds that increased the number of bids by nearly 50% and decreased the cost of photovoltaic by 39% and wind by 23%.
Similarly in the United Arab Emirates, an auction in Dubai this year contracted the lowest-ever price of electricity from a solar park, without financial support, at less than US0.06c/kWh (ZAR0.73c/kWh).
Components of successful auctions
The winner-selection process is at the heart of the auction procedure, and it involves the application of the bidding and clearing rules, as well as awarding contracts to the winners, explains the guidebook.
Upendra Tripathy, Secretary to the Government, Ministry of New and Renewable Energy and Chair of IRENA’s ninth Council meeting said: “Auctions have been a tremendous support to India’s renewable energy programme. Through auctions, we discovered the real market price for solar power, which has decreased almost 65% since 2010.”
The new guidebook includes a summary for policy makers and an overview of renewable energy policies and auctions. It also includes technical auction design sections on demand, qualification requirements, the winner selection process and sellers’ liabilities.