Auction Design Process

Speeches Shim

The auction design process allows policymakers to align policy objectives early and tailor the auction to policy objectives, level of market readiness, and institutional capabilities.

Policymakers have many objectives for auctions such as promoting private sector investment and socioeconomic progress. Adapting the auction design to local framework conditions and priorities is one of the key steps to ensure success in achieving auction policy objectives. Good auction design can enable policymakers to advance many objectives, including reaching renewable energy targets, lowering generation costs, supporting the integration of renewable energy, and creating local jobs. Good auction design also mitigates risks to all parties and reduces the chance of project construction delays, non-completion, and underperformance during the operation phase.

Auctions can be implemented in countries with different degrees of electricity sector maturity and power sector size. At the beginning of the auction process, a government defines its policy objectives and considers institutional capacities at its disposal to meet future auction requirements. Countries pursue different, sometimes conflicting, objectives when scaling up renewable energy. Clearly defined policy objectives early in the auction design process create a transparent environment that leads to greater success. Next, a government assesses the level of market readiness in terms of market size, project development cycles, and the available project pipeline, and then analyzes the existing regulatory framework. A government may consider introducing a pilot auction to gain experience and kick-start a project pipeline.

Happy woman relaxing with wind generators turbines beautiful sunset background.
Happy woman relaxing with wind generators turbines beautiful sunset background in Khao Kho mountain, Petchabun, Thailand.
© theeraphong / Adobe Stock

Renewable energy auctions have emerged as the best practice for procuring least-cost energy. This competitive, transparent process helps countries meet their energy goals and attract private investment on their journey to self-reliance.

In today’s rapidly evolving renewable energy marketplace, it can be challenging to keep track of current best practices in renewable energy policy, innovations, and market trends. USAID developed the Renewable Energy Auction Toolkit to help international development professionals, energy ministries, utilities, policymakers, and regulators to design and successfully implement energy auctions that expand access to affordable and sustainable clean energy.

The proliferation of renewable energy resources requires comprehensive changes to power infrastructure, market design and business models. USAID, through its Scaling Up Renewable Energy (SURE) project, helps partner countries plan, procure, and integrate renewable energy. USAID’s efforts enhance global energy security; promote private sector investment through transparent, competitive procurement; and open paths to self-reliance by empowering partner countries to control their own economic and social development.

Wednesday, July 8, 2020 - 1:00am

Last updated: November 20, 2020