Market determined payment for service and goods (Renewable energy auction)
Sector
Sub-sector
Renewable energy auction (also known as “demand auctions” or “procurement auctions”): Competitive bidding process is used for electricity from renewable energy or where renewable energy technologies are eligible. Where an auctioneer (e.g. the government, a power distribution company) issues a call for tenders to procure a certain capacity or generation of renewables-based electricity, project developers who participate in the auction typically submit a bid with a price per unit of electricity at which they are able to realize the project. The auctioneer evaluates the offers on the basis of the price and other criteria and signs a power purchase agreement with the successful bidder.
The increasing interest in auction schemes is driven by their ability to achieve deployment of renewable electricity in a well-planned, cost-efficient and transparent manner while also achieving a number of other objectives. The strengths of auctions lie in their i) flexibility, ii) potential for real price discovery, iii) ability to ensure greater certainty in price and quantity and iv) capability to guarantee commitments and transparency.
Competitive bidding process is used for electricity from renewable energy or where renewable energy technologies are eligible.