Countries choose auctions for renewable energy at low cost

Auctions resulted in reduction in price of solar power by almost 65 per cent in India

By Aruna Kumarankandath
Published: Tuesday 23 June 2015

In a new publication released by intergovernmental organisation, the International Renewable Energy Agency (IRENA), reveals that auctions are becoming an accepted policy option to support renewable energy development worldwide.

Also called reverse bidding, the auction policy scheme works by asking the developers to bid for contracts, with the lowest bids usually securing government support. 

“Auctions have been a tremendous support to India’s renewable energy programme. Through auctions, we discovered the real market price for solar power, which has decreased almost 65 per cent since 2010,” said Upendra Tripathy, secretary in the Ministry of New and Renewable Energy. 

The new publication—Renewable Energy Auctions: a Guide to Design—states that more than 60 countries around the globe have now adopted renewable energy auctions, compared to six countries in 2005, with the aim to attract competition and reduce costs.

“This guide provides both high-level and technical support to policy makers considering auctions as a means to reach their sustainability targets. Its release is timely and can help support the growth of auctions as a policy tool for renewable energy deployment,” says Rabia Ferroukhi, IRENA deputy director and lead author of the report.

The guidebook analyses auction design elements and highlights best practices for policy makers and investors. 

In South Africa, for example, multiple bidding rounds increased the number of bids by almost 50 per cent and decreased the cost of solar photovoltaic and wind installations by 39 and 23 per cent respectively. Similarly, in the United Arab Emirates, an auction had a bid with the lowest-ever price of power from a solar park, without financial support, at less than 6 US cents per kilowatt-hour. These achievements of reduction in cost of renewable power were seen only in large-scale installations. 


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