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Auctions for Renewable Energy Support: Effective use and efficient implementation options

Periodic Reporting for period 2 - AURES (Auctions for Renewable Energy Support: Effective use and efficient implementation options)

Reporting period: 2016-07-01 to 2017-12-31

Auctions, as a competitive and market-based mechanism to allocate support for renewable energy sources (RES), are becoming a prevailing feature in energy policy across Europe. During the past several years, auctions to allocate support for RES have been implemented in many European Member States. This is partly due to a natural move towards more market-based support alongside the economic maturing of RES technologies and partly due to a push by the European Commission towards competitive support. However, experiences with this policy instrument are limited and ambiguous.

AURES was the first European project to exclusively deal with auctions. During a three-year project period, AURES has, through target-oriented analysis as well as knowledge-sharing and capacity-building activities, established solid foundations for an effective and cost-efficient implementation of RES auctions in Europe. The project makes crucial knowledge easily available for policy makers and other stakeholders and directly supports the implementation of RES auctions through coordination and support activities. AURES addressed the market uptake of existing and emerging renewable electricity technologies. The specific challenge was to ensure the continued growth of RES in Europe, so that renewable targets can be reached (20% RES in 2020; 27% or more in 2030).

The overarching goal of AURES was thus to support policymakers in improving the effectiveness and cost-efficiency of their RES support through the introduction of auctions. AURES had three specific objectives: 1) Generate new insights on the applicability of auctions for renewable support and on specific auction designs; 2) Provide tailor-made policy support in the implementation of auctions; 3) Facilitate knowledge exchange between stakeholders.

The project consortium consisted of eight renowned public institutions and private firms from five European countries and combines some of the leading energy policy experts in Europe.
A number of results have been achieved within the different project areas:

Auction-theoretical analysis: An evaluation framework for analysing RES auctions has been established. All relevant design elements for RES auctions are described. A comprehensive evaluation of suitable auction types and pricing rules, including relevant auction experiences from other industries was conducted. The risk of winner’s curse was analysed both theoretically and experimentally. Four policy memos were prepared on secondary objectives in auctions, pre-qualifications and penalties, award types and auction outcomes, and competition in auctions. A social welfare analysis comparing auction schemes with other policies showed that immature technologies with high uncertainty about technology cost may be better supported using non-competitive measures until they reach a certain maturity stage.

Empirical analysis: AURES has analysed and evaluated auctions schemes in 12 European countries and 8 other countries. A synthesis report identified best practices and lessons learned from existing auction schemes around the world.

Model-based analysis: A cash-flow model and a game theoretic model have been developed to simulate cost-based (non-strategic) bid prices as well as strategic behavioural incentives under different auction designs. The game theoretic model was integrated into a whole energy system modell, Green-X, which quantifies policy cost for the required RES uptake in the European 2030 target horizon.

Policy support: AURES has cooperated with policymakers in Germany, Denmark, Austria and the UK providing inputs to auction design considerations, supporting impact assessments and giving expert consultations on specific topics. AURES was in contact with policymakers and stakeholders from several countries in the EU and abroad. We have also been invited to pan-European coordination activities, such as CA-RES (EU Concerted Action) and facilitated Member State discussions. The project has also organised workshops, meetings and personal contacts with policy officers from DG Energy and DG Competition and provided recommendations regarding auction design policies in the new Renewable Energy Directive and State Aid Guidelines. The AURES Auction Designer is an online policy tool with an interactive user interface developed for policymakers and industry stakeholders, presenting users with auction design packages depending on their specific market situation and policy objectives.

Knowledge sharing and capacity building: 40 interviews have been undertaken with policymakers, industry representatives and research institutions about specific auction implementations and their relevant experiences. We have established the AURES AUCTION ACADEMY, a series of eight webinars that inform policy makers and the industry about best practices in RES auction design. We have organised 14 physical workshops and 12 webinars and a final conference in Brussels. The project consortium was invited to speak at 60 conferences and workshops. 19 newsletter has been sent to 263 subscribers. We were also active on social media, such as Twitter. The AURES website is a rich source of information about what are RES auctions, what elements need to be considered, what are suitable auction designs, and what are the experiences with auctions around the world. 60 reports are published on the website along with news articles, blog entries, and of course our auction tools.

The knowledge base established during the project is being used extensively by policymakers and industry stakeholders and has allegedly become the go-to source for information about RES auctions.
The main impact of AURES is on policy. Our analysis and cooperation activities support the elaboration of future effective and cost-efficient RES support policies in Europe. AURES facilitates a more efficient use of tax payers’ money by identifying best practices and giving tailor-made policy support, thereby preventing inefficiencies in the implementation of RES auctions. Successful auction schemes constitute an effective means of controlling overall support, thus making support policies more socio-economically viable. In this, the project helped to achieve RES targets, which has a positive impact on the environment in form of reduced emissions. AURES has contributed directly to the market transformation of the European electricity system into a more competitive, transparent and integrated market. The project covered a broad range of different market conditions and specific characteristics, deriving common best practices and lessons learnt to support policy makers and other stakeholders to replicate successful auction schemes and design elements suiting their specific situation. Replicability was also an important factor for the scientific approach, using well-founded methodologies for auction-theoretic analysis, experiments, cash-flow analysis and game-theoretic modelling, to receive valid and robust results in the analysis.

Expected impacts are to provide essential knowledge about the functioning of RES auctions and to ensuring the usage of the new knowledge through interactive and innovative dissemination and communication activities. AURES has reached 919 participants in dedicated workshops and webinars, we have counted 5,280 stakeholder interactions. Our webpage has been visited 19,000 times as Dec 2017 and page visits to publication downloads counted 13,000.
AURES auction illustration - hammer and offshore wind