Grid investment and subsidy tradeoffs in renewable electricity auctions

Daniel Davi-Arderius, Elisa Trujillo-Baute and Pablo del Río

Utilities Policy, 2023, vol. 84, issue C

Abstract: Geographically neutral renewable energy auctions incentivize investors to locate their plants in optimal locations to minimize their bid prices, but this concentration might result in substantial grid investments. Ultimately, maximizing the social welfare for consumers requires minimizing the sum of renewable energy auction subsidies and grid investments. We quantify the trade-offs between grid investment costs and auction subsidies in geographically neutral and geographically diverse renewable energy auctions. We find that consumer costs are minimized in geographically diverse auctions, e.g., when renewables are not only located in the most optimal regions and, thus, when the auction subsidies are not minimized.

Keywords: Renewable energy; Renewable energy auctions; Grid costs (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:juipol:v:84:y:2023:i:c:s0957178723001327

DOI: 10.1016/j.jup.2023.101620

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