Design of multi-attribute procurement auction for the Korean clean hydrogen power generation auction market

Jisu Sim, Jihyeok Jung, Deok-Joo Lee and Kiho Yoon

Energy Economics, 2025, vol. 150, issue C

Abstract: This paper presents a procurement auction mechanism for the Korean clean hydrogen power generation auction market, addressing the limitations of the existing auction design. We design a multi-attribute auction framework with a Vickrey-score sealed-bid auction rule consisting of scoring, allocation, and payment rules, allowing sellers to bid on both price and non-price attributes. We adopt the hydrogen co-firing rate and capacity factor as non-price attributes to comprehensively evaluate the contributions to greenhouse gas reduction and fuel supply reliability. Through equilibrium analysis, we demonstrate that the proposed mechanism induces a weakly dominant bidding strategy for sellers. This strategy leads to optimal price bids based on their levelized cost of energy (LCOE) and independently determined non-price attributes. Numerical analysis using real-world parameters from the Korean hydrogen industry highlights the importance of carefully structuring the score function. Moreover, the results confirm that the proposed auction mechanism achieves higher market efficiency and a greater share of clean hydrogen in fuel usage compared to single-attribute price-only auctions.

Keywords: Hydrogen power generation; Multi-attribute auction; Procurement auction; Mechanism design; Low-carbon energy (search for similar items in EconPapers)
JEL-codes: D44 D82 Q42 Q48 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:150:y:2025:i:c:s014098832500698x

DOI: 10.1016/j.eneco.2025.108871

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