Policy relevant lessons from research on renewable energy auctions

Abstract

Renewable energy auctions have emerged globally as a primary tool for promoting electricity from renewable energy sources (RES-E) by awarding operational support to projects that bid the lowest level of required support. While their widespread adoption reflects perceived efficiency advantages over other support mechanisms, such as administratively-set tariffs, the effectiveness of RES-E auctions in meeting policy objectives is highly sensitive to specific design elements. This paper synthesizes policy-relevant insights from extensive research in the EU-funded AURES II project, which has analysed renewable energy auctions in diverse contexts with a focus on European countries. Key findings from the AURES II project address how auction design influences outcomes across multiple criteria, such as cost-effectiveness and project realisation rates. The paper highlights both successes and challenges in auction implementation, emphasizing the common trade-offs between policy objectives. Results underscore that well-designed auctions can promote RES-E efficiently, but also caution that suboptimal design can lead to unintended outcomes. Based on these findings, the paper offers forward-looking recommendations to guide policymakers in optimizing auction design to balance policy goals and enhance renewable energy deployment.