This paper provides a framework to measure technology selection bias in multi-technology renewable energy auctions. Under selection bias we mean that the auction rules favour a certain technology in some way. To quantify the bias, the difference in auction bids is compared with the difference in the social value of the projects, obtained by aggregating the individual and social benefits. If the difference between the two values is the same, the auction is unbiased, since the auction then ranks the projects according to their social value. The paper applies the theoretical framework to compare fixed premium and CfD auction schemes on hypothetical cases and in the context of an Italian case study. The study shows that CfD-type auctions typically tend to favour solar photovoltaic (PV) capacity, while fixed premium-type auctions tend to favour wind capacity, often leading to outcomes where the more socially beneficial technology does not win in the auction. The research also shows that externalities can have a significant impact on technology selection and that, contrary to economic theory, it is possible that internalising externalities in auctions can lead to less optimal outcomes.
Authors:
- Diallo Alfa, Regional Centre for Energy Policy and Research (REKK)
- Lena Kitzing, Technical University of Denmark, DTU Department of Wind & Energy Systems
