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| Srl | Item |
| 1 |
ID:
180847
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| Summary/Abstract |
The recent rise of auctions to allocate support payments for renewable energy projects creates new uncertainties during project development and causes a decrease in support levels. We investigate the effects of the shift to auctioning on costs of capital (CoC) and financing conditions through semi-structured and focus group interviews with 40 experts in onshore and offshore wind project development and financing in Europe. We find that auctions create a competitive environment that pressures the industry into accepting higher risks and lower returns. Banks have reduced debt margins, while large investors decreased hurdle rates and equity returns, despite additional risks from auctions, such as uncertainty about future award prices, allocation and qualification risks. The risk of being awarded support and incurring sunk costs makes smaller bidders averse to participating in auctions. Competitive bidding may also decrease secured revenues and increase offtaker risks, especially when combined with sliding premiums. Despite increased price risk, the competitive pressure driven by project sponsors, seems to lower financing costs and hurdle rates, thus decreasing CoC for offshore projects. To reduce negative impacts on CoC and financing, policymakers can minimise additional risks, by adopting remuneration schemes that stabilise revenues, and supporting smaller actors through removing participation hurdles.
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| 2 |
ID:
116931
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| Publication |
2012.
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| Summary/Abstract |
Nations today are urgently challenged with achieving a significant increase in the deployment of renewable energies. In Europe that need has given rise to a debate about the most effective and efficient support strategy. Whilst the different interests debate whether full European harmonisation or strengthening of national support policies for electricity from renewable energy sources (RES-E) is the best way forward, individual national support schemes are rapidly evolving. This study investigates how the EU member states have applied support policy types over the last decade. By identifying predominant developments in the application of feed-in tariffs, premiums, tradeable green certificates, tax incentives, investment grants, and financing support for specific technologies (wind, biomass, PV), this study shows that Europe is currently experiencing certain tendencies towards a 'bottom-up' convergence of how national policy-makers design RES-E policy supports. While some outliers remain, the policy supports of most countries become more similar in the policy types applied (dominance of feed-in tariffs) and in their scope of implementation (differentiation for installation sizes and 'stacking' of multiple instruments). These trends in national decision-making, which show tendencies of convergence, could make an EU-driven 'top-down' harmonisation of support either dispensable or at least (depending on the agreement) less controversial.
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| 3 |
ID:
192712
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| Summary/Abstract |
We develop a concept to identify and quantitatively assess technology selection bias in multi-technology renewable energy auctions. We show that simple price rules are insufficient to efficiently select winning projects in multi-technology tenders when they incorporate individual costs of producers only, and exclude system effects, market benefits and external costs. With our concept of quantifying unit social value, all relevant external elements can be incorporated in the evaluation. The introduction of an objective measure (as difference of differences between unit social value and auction bid prices) allows the quantitative assessment of systematic selection bias between technologies under different remuneration designs. We illustrate our concept by applying it to generic European renewable energy technologies (wind and solar energy) and major applied remuneration types (contract-for-difference and fixed premium schemes). We also show that are concept is applicable for real auction data, by presenting a case study about Italy. The main conclusion of the study is that selection by price only, can constitute a systematic bias for all investigated remuneration designs. Both schemes are in our case biased toward a given technology. The internalisation of external cost may not necessarily lead to better social outcomes in the selection of auction winners, as it can be overshadowed by the initial bias of the chosen remuneration design. We conclude that considerate design, including the potential differentiation of rules, e.g., through introduction of a technology bonus, to minimise selection bias, and careful monitoring of the competitive situation between participating technologies in a multi-technology auction are required to ensure efficient selection.
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| 4 |
ID:
186413
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| Summary/Abstract |
Auctions for renewable energy support allocation are on a triumphant global advance. We compare performance of renewable energy auctions in terms of effectiveness (realisation rate and period) and efficiency (price outcomes) from two world regions: South Africa and European countries (Germany, France, the Netherlands). We develop an assessment framework for compliance incentivisation in auction design, covering qualification criteria, penalties, and compliance monitoring. We find that a 100% realisation rate in South Africa is connected to a strong compliance package, while European countries have moderate realisation rates (23%–87%) with relatively lenient compliance packages. We observe that realisation periods are correlated with project size rather than granted realisation period. Although South African projects generally have longer realisation periods (34 months for PV and 40 months for onshore wind) than European projects (16.5–30 months for PV and 19–25 months for onshore wind), they perform comparably considering that they are 10–13 times larger. Comparing average auction prices with equivalent technology-specific LCOE estimates, we find a general convergence towards the global average, with South Africa having the sharpest price decline (75% PV and 54% onshore wind), albeit starting from the highest level. Our findings, especially on importance of compliance incentivisation and weak impact of granted realisation periods, are valid across world regions and can support policymakers everywhere in designing effective and efficient renewable energy auctions.
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