Specific Nature of Price Competition at an Auction of Renewable Energy Sources (RES) in the EU

Abstract

The article is devoted to the efficiency estimation of the deployment of RES auctions in the EU to reduce the RES generation cost and consequently the cost of its state support. The relevance of the study is due to the fact that to improve the efficiency of state support for RES generation in the EU, as the main driver of its development, since 2017 EU member states have been required to set its level at auctions. To achieve this goal, we analyzed the dependence of RES electricity prices at auctions in 14 EU member states (and separately in Germany and France) on the ratio of volume participating with volume requested and volume awarded as well as technology neutrality/specificity of auctions (number of competing technologies). The following results were obtained in the study. Firstly, both in the EU, as well as in Germany and France RES electricity prices were lower at auctions where volume participating exceed volume requested rather than volume awarded. The following conclusions were drawn. Competition at the auction arises when not all announced projects will receive support within the allocated amount of funding. Thus, more correct indicator of competition level at the auction is oversubscription of the auction. Secondly, in comparison to the EU, in Germany and France lower RES electricity prices were set at technology neutral auctions. Competition of technologies should lead to deployment of the most cost-efficient RES generating plants; therefore, the conclusion is drawn that in the absence of risks of suboptimal results priority should be given to technology neutral auctions.