When Will First-Price Work Well? The Impact of Anti-Corruption Rules on Photovoltaic Power Generation Procurement Auctions

Peng Hao (), Jun-Peng Guo, Eoghan O’Neill and Yong-Heng Shi
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Peng Hao: College of Economics and Management, Tianjin Renai College, Tianjin 301636, China
Jun-Peng Guo: College of Management and Economics, Tianjin University, Tianjin 300072, China
Eoghan O’Neill: Energy Policy Research Group (EPRG), University of Cambridge, Cambridge CB2 1AG, UK
Yong-Heng Shi: College of Management and Economics, Tianjin University, Tianjin 300072, China

Sustainability, 2023, vol. 15, issue 4, 1-24

Abstract: Along with the prevalence of photovoltaic (PV) procurement contracts, the corruption between auctioneers and potential electricity suppliers has attracted the attention of energy regulators. This study considers a corruption-proof environment wherein corruption is strictly suppressed. It elaborates a mechanism to explore the impact of corruption-proof measures on PV procurement auctions. It adopts incentive compatible constraints based on revelation principle to reflect PV firms’ optimal utilities. It employs first-price and first-score auctions and uses the Bayesian Nash equilibrium to provide a description of market outcomes. The results show that several strategies have different impacts on social welfare, PV firms’ utility, and the benefits of corruption. First, a first-price auction cannot act as a suitable policy because it may encourage corruption. Second, the first-score choice is desirable for social welfare to fit the forthcoming high-quality and low-price surroundings. Third, the first-score strategy maximizes PV firms’ utility and total income. The implications suggest that regulators ought not to employ first-price auctions in the future PV market from the perspective of social welfare. Another disadvantage of the first-price approach is that it enables the PV firm to maintain the utmost benefit from corruption.

Keywords: photovoltaic procurement auction; corruption-proof measure; first-price; first-score (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2023
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