Reaching India’s Renewable Energy Targets:Effective Project Allocation Mechanisms

Shrimali, Gireesh and Konda, Charith and Farooquee, Arsalan Ali and Nelson, David (2015): Reaching India’s Renewable Energy Targets:Effective Project Allocation Mechanisms.

Abstract

Auctions for renewable energy are gaining popularity around the world. In this context, we examined 20 renewable energy auctions in India and elsewhere to answer two questions: first, have auctions been effective; and second, how can they be designed to achieve India’s renewable energy targets? We found that auctions are almost always cost-effective, with savings up to 58% from baseline feed-in tariffs. However, auctions have not resulted in adequate deployment, with only 17% of the auctions with greater than 75% deployment. We then examined how to best design auctions by assessing seven major risks, and found the following: first, for every 1% increase in total risk, deployment effectiveness decreased by 2 percentage points; second, project specific risks have 60% greater impact than auction specific risks; and third, deployment effectiveness is most affected by auction design, completion, and financial risks. We also found that right policy design can lower these risks to improve both deployment and cost effectiveness.

• Item Type: MPRA Paper
• Language: English
• Keywords: Renewable energy auctions, competitive bidding, electricity auctions, effectiveness of auctions
• Subjects: Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics

References

Becker B. and Fischer D., 2013; Promoting Renewable Electricity Generation in Emerging Economies, Energy Policy, 56: 446-455. Conti M., 2012; How Renewable Energy Reverse Auction Mechanisms Work in Practice; Cozzi P., 2012; Assessing Reverse Auctions as a Policy Tool for Renewable Energy Deployment; Working paper; Deshmukh R., Gambhir A., Sant G., 2011; India’s Solar Mission: Procurement and Auctions; Economic and Political Weekly, XLVI (28). Donovan C., 2011; Discussion paper series on asset pricing: renewable energy in growing economies Eberhard A., Kolker J., Leigland J., 2014; South Africa’s Renewable Energy IPP Procurement Program: Success Factors and Lessons; World Bank working paper; Eisenhardt K., 1989; Building Theories from Case Study Research; Academy of Management Review, 14 ( 4): 532-550. Hoppmann J., Peters M., Schneider M., Hoffmann V., 2013; The two faces of market support – How deployment policies affect technological exploration and exploitation in the solar photovoltaic industry; Research Policy, 42 (4): 989-1003. KREDL, 2011; Order of the Govt. of Karnataka KREDL, 2014; Request for Proposal for 50MW Solar PV KREDL, 2015; Website accessed in March 2015 Kreycik C., Couture T., and Cory K., 2011; Procurement Options for New Renewable Electricity Supply; NREL Technical Report 6A20-52983 Likert R. 1932; A Technique for the Measurement of Attitudes. Archives of Psychology, 22 (140): 1-55 Madrigal M., Stoft S., 2011; Transmission Expansion for Renewable Energy Scale-up: Emerging Lessons and Recommendation; World Bank Working Paper; Maurer L., Barroso L., 2011; Electricity Auctions: An Overview of Efficient Practices; IFC Working paper; Mitchell C., Connor P., Renewable energy policy in the U.K. 1990-2003, Energy Policy, 32 (17): 1935-1947. Natalia F., Fehr N., Harbord D., 2002; Modeling Electricity Auctions; Electricity Journal, 15 (7): 72-81. Phadke A., Bharvirkar R., Khangura J., 2011; Reassessing Wind Potential Estimates for India: Economic and Policy Implications; LBNL working paper Shah S., 2012; Why is the Wind Power Industry in India Afraid of Reverse Auctions in Rajasthan; S&P, 2009; Key Credit Factors; Methodology and Assumptions on Risks for Utility-Scale Solar Photovoltaic Projects; World Bank, 2013; Paving the Way for a Transformational Future; Lessons from Jawaharlal Nehru National Solar Mission Phase 1