Auctions for allocation of offshore wind contracts for difference in the UK

Marijke Welisch and Rahmatallah Poudineh

Renewable Energy, 2020, vol. 147, issue P1, 1266-1274

Abstract: The contract for difference (CfDs) auctions are the cornerstone of the UK electricity sector's decarbonization policy and were introduced as part of the Electricity Market Reform in 2013. The CfD auctions appear to have been successful in achieving low bids for low-carbon technologies, especially offshore wind power. However, the design of the auction increases the probability of speculative bidding, while the one-shot nature of the auction prevents bidders from learning and from utilizing information efficiently. We show that implementing a stringent non-delivery penalty to induce truth telling can improve deployment rate without increasing support costs. Moreover, by holding regularly scheduled (annual, for example) auctions, information on technology cost decreases can be better incorporated into the bids, lowering investor uncertainty and thus having a positive effect on support costs.

Keywords: Renewable energy auctions; Contract for difference; Offshore wind; Electricity market reform; Agent-based modelling (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0960148119314168
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:renene:v:147:y:2020:i:p1:p:1266-1274

DOI: 10.1016/j.renene.2019.09.085

Access Statistics for this article

Renewable Energy is currently edited by Soteris A. Kalogirou and Paul Christodoulides

More articles in Renewable Energy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().