Community Research and Development Information Service - CORDIS

Periodic Reporting for period 1 - AURES (Auctions for Renewable Energy Support: Effective use and efficient implementation options)

Reporting period: 2015-01-01 to 2016-06-30

Summary of the context and overall objectives of the project

Auctions, as a competitive and market-based mechanism to allocate support for renewable energy sources (RES), are on the verge of becoming a prevailing feature in energy policy across Europe. Many European Member States are currently implementing RES auctions. Auctions have the potential to significantly improve the performance of support schemes, but there are potential pitfalls and difficulties to be avoided. Until now, experiences with auctions as support policy instrument are limited and ambiguous.

A comprehensive assessment of auctions and their suitability for renewable support in Europe is urgently needed to facilitate their successful design and cost-efficient implementation. AURES is the first European project to exclusively deal with auctions for the support of electricity from renewable energy sources. AURES combines dedicated, detailed and target-oriented analysis of auctions required to successfully implement RES auctions in practice on the one hand with capacity building of policy makers and market participants on the other. 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.

The overarching goal of AURES is to support policy makers in improving the effectiveness and cost-efficiency of their RES support through the introduction of auctions. AURES has 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.
New insights are generated on RES auctions using theoretical, experimental, empirical, and model-based approaches. We learn from real auction implementations through literature review, interviews with policy makers, industry representatives and researchers, and cooperation cases with implementing bodies. This knowledge base is being processed into a flexible online policy support tool that provides tailor-made information suited to specific market situations and policy preferences, helping policy makers and market participants to make informed decisions about auction design. By facilitating an intense and continuous stakeholder dialogue and by establishing a knowledge sharing network via workshops, webinars, bilateral meetings, and expert consultations, the project serves as capacity building platform.

The project consortium consists of nine renowned public institutions and private firms representing eight European countries and includes some of the leading energy policy experts in Europe, with an impressive track record of successful research and coordination projects.

Work performed from the beginning of the project to the end of the period covered by the report and main results achieved so far

In its first 1.5 years, the AURES project has, through target-oriented analysis as well as knowledge sharing and capacity building activities, established solid foundations for supporting the effective and cost-efficient implementation of auctions for support of renewable energy sources (RES) in Europe. The project has gathered, evaluated and published an extensive amount of information about past, existing and future RES auction implementations, inside and outside of Europe, for multiple and single technologies, including wind, solar, and biomass. AURES has evaluated suitable auction design elements under different market conditions, and identified best practices and lessons learned, e.g. regarding measures to increase the success of RES auctions through penalty design. AURES serves as a capacity building platform by facilitating an intense and continuous stakeholder dialogue.

Until now a number of results have been achieved within 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 and published. A comprehensive report evaluating suitable auction types and pricing rules is published. We have also published an analysis of relevant auction experiences from other industries. A finalised research paper discusses measures to increase project realisation in RES auctions and gives recommendations on the design of pre-qualification requirements and penalties.

Empirical analysis: The project has analysed past and ongoing auctions schemes in Brazil, California, China, Denmark, France, Germany, Ireland, Italy, the Netherlands, Portugal, South Africa, and the UK. We have assessed future auction implementation options in Croatia, Poland, Spain, Slovakia and a cross-border cooperation between Denmark and the Netherlands. A recently published synthesis report identifies best practices and lessons learned from existing auction schemes around the world.

Model-based analysis: A cash-flow model has been developed to simulate single projects and their potential (non-strategic) bid prices and required support levels under different auction designs. The model is publicly available and is expected to become a valuable tool for stakeholders undertaking impact assessments of auction designs. Building upon that, an actor-based model with a game-theoretic approach to comprehensively simulate auction outcomes is currently under development.

Policy support: An important part of the project is the cooperation with policy makers on ongoing auction implementations in EU Member States. Establishing an open cooperation environment in ongoing policy processes can be challenging. Until now, we have successfully cooperated with policy makers in Germany and Denmark. Here, we have provided inputs to e.g. auction design choices, supported impact assessments and have been requested for several expert consultations on specific topics. A prototype of the developed cash-flow model has immediately been used in assessing different Danish auction design options. The cooperation with our other two targeted countries, Austria and the UK, is more challenging, but by being flexible on the cooperation time horizon and the cooperation partners, we have been able to also start this cooperation up. Until now, AURES has provided expert consultations in 14 dedicated in-person meetings with policy makers in case cooperation and additional 18 independent stakeholder consultations with policy makers and industry representatives, and has conducted even more phone/skype conversations about future RES auction designs. The project has also provided recommendations regarding auction design policies to the European Commission.

Knowledge sharing and capacity building: 40 interviews have been undertaken with policy makers, industry representatives and research institutions about specific auction implementations and their relevant experiences. We have

Progress beyond the state of the art and expected potential impact (including the socio-economic impact and the wider societal implications of the project so far)

AURES is the first European project to exclusively deal with auctions for the support of electricity from renewable energy sources (RES) and provides crucial new insights for improving the effectiveness and cost-efficiency of RES support through auctions in Europe. The comprehensive and interdisciplinary approach combining political, economic and behavioural insights clearly distinguishes AURES from existing work in this field and provides substantial value added, contributing to informed policy decision-making and to the success of auction implementations across Europe.

The main impact of the project 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. The project covers a broad range of different market conditions and specific characteristics. We derive common best practices and lessons learned and so help policy makers and other stakeholders to replicate successful auction schemes and design elements suiting their specific situation.

Successful auction schemes constitute an effective means of controlling overall support, thus making support policies more socio-economically viable. In this, the project is helping to achieve RES targets, which also has a positive impact on the environment in form of reduced emissions. The introduction of auctions as competitive, market-based schemes to allocate support payments is important for the market integration of RES. Also, they make cross-border cooperation more accessible. AURES thus contributes directly to the market transformation of the European electricity system into a more competitive, transparent and integrated market.

The project measures two different types of impact. First, the project's impact in terms of information exchange and capacity building is measured. A mid-term survey confirmed that 89% of the responding stakeholders are very satisfied or satisfied with the amount and quality of the insights provided by AURES and 56% agree that the project to a great extend or some extend has provided valuable support for their decision making and dialogue on RES auctions. We have reached 281 participants in our dedicated workshops and webinars, and at least additional 270 persons through invited talks. Overall, we have counted more than 1,900 stakeholder interactions. Our webpage has been visited 7,595 times (end June 2016) and we have received very good feedback about the level and usefulness of information.

Second, the project is expected to have quantifiable market impacts. Here, we expect the project to contribute to reduced transaction costs in the implementation of auctions in European Member States from 2020 onwards. We expect the project to contribute to lower support expenditures through the competitive setting of support levels from 2020 onwards. At the same time, we expect the project to contribute to lower electricity generation costs through a more efficient allocation of support. During the second phase of the project we will reevaluate these expectations.

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