Effectiveness and efficiency of auctions for supporting renewable electricity – What can we learn from recent experiences?

The current debate about using auctions to support electricity from renewable sources is very polarised. While their proponents imply that auctions are the universal remedy, their opponents consider them a major threat to other formerly successful policies for renewables. In theory, auctions can improve the effectiveness and efficiency of support. However, the empirical effects of auctions on renewable support have not yet been fully analysed. Here, we use empirical data from Brazil, France, Italy, the Netherlands and South Africa to compare the effectiveness and efficiency of auction-based schemes with previous support schemes. Comparisons with countries that did not switch to an auction scheme in the time period assessed complement the study. The analysis shows mixed results. While auctions can indeed improve efficiency and effectiveness, this cannot be identified as a generic trend. The evidence based on existing data is neither sufficient to recommend the introduction of auctions as a generic instrument, nor does it show that previous support schemes were typically superior. Therefore, policy makers in countries which already have effective and efficient support schemes of any kind need to be very careful when designing auctions in order to achieve the targeted improvements.