Expert Roundtable on Renewable Energy Auctions and Experiences in Germany

On 28 September 2018, supported by the National Energy Administrition (NEA) the GIZ Sino-German Energy Partnership project and the German Energy Transition Expertise for China project (commissioned by BMWi) jointly hosted an Expert Roundtable on Renewable Energy Auctions and Experiences in Germany, convened in the offices of the China National Renewable Energy Centre. Mr. Malte Luks from German Federal Network Agency and Mr. Anders Hove from GIZ successively introduced German and international renewable energy auction experiences, and participants discussed auction design and development in Germany and China.

Mr. Luks presented on Germany’s renewable energy deployment status, current incentive mechanisms, and experiences with solar and onshore wind auctions. He recommended that a functional auction design should be transparent, simple, and clear, while ensuring high competition, high realization rates, and participation of a large number of stakeholders. Since the first auction in 2015, has Germany achieved impressive results, and the auction designs appear successful. Auctions have achieved up to 99.9% realization rate. The average price of winning bids in solar auctions has fallen by 50% in the past three and half years.

One of the key success factors Mr. Luks emphasized is simplicity: auction mechanisms should be simple enough to ensure sufficient competition. For example, the current solar auction mechanism in Germany adopts pay-as-bid with ranking by price (lowest first) and in case of price equality, ranking by project size (smallest first); these are the only criteria. Wind and solar projects have two years to realize projects. Solar projects have only to complete a four-page application form and specify their location, no building permits are required.

Mr. Hove, the Project Director of the German Energy Transition Expertise for China project, gave a brief review of international auction experiences, illustrating examples from Brazil, India, Japan and Nevada in the U.S. Pitfalls discussed included regulatory uncertainty, overly-strict price caps leading to cancelled auction results, difficulties accounting for project delays beyond the control of developers such as slow grid connections, and complex bidding document requirements.

The workshop will be the first of several exchanges on the topic of renewable energy incentives and auction design over the course of 2018 and 2019, as China strives to transition to subsidy-free policies for wind and solar in the next few years while ensuring the country stays on track to achieve increasing proportions of energy from clean sources.