Prequalification Requirements and Ceiling Prices

Speeches Shim

Policymakers must carefully select and balance conditions, such as qualification requirements and ceiling prices, that bidders must comply with to participate in a renewable energy auction.

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.

To control for project quality and price in the auction, most countries have implemented conditions for participation, such as prequalification requirements and ceiling prices that bidders need to comply with when taking part in the renewable energy auction. In general, stricter requirements allow governments to assume greater control over auction outcomes and to increase the chances that awarded projects will be realized. However, some of these conditions for participation entail higher costs for bidders. They might also create barriers for the participation of some actors and decrease overall competition levels in the auction. These effects need to be balanced when selecting conditions for participation.

Happy woman relaxing with wind generators turbines beautiful sunset background.
Auctions are best practice for procuring least-cost energy. This competitive, transparent process helps countries meet their energy and climate goals and attract investment into their clean energy futures.
© theeraphong / Adobe Stock

TOOLKIT – Auctions are best practice for procuring least-cost energy. This competitive, transparent process helps countries meet their energy and climate goals and attract investment into their clean energy futures.

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.

Mother holding her son in nature. Wind turbines in the background.
Through the Scaling Up Renewable Energy program, USAID helps partner countries power economies with renewable energy, meet international climate commitments, and open markets to private investment and competition.
© Viktor Pravdica / Adobe Stock

2017–ONGOING, GLOBAL – USAID’s Scaling Up Renewable Energy (SURE) program helps partner countries meet bold climate commitments by accelerating their transition to more affordable, reliable, and accessible energy that spurs growth, powers health systems, and reduces emissions.

Through SURE, USAID provides a variety of services to help policymakers, utilities, and regulators plan, procure, and integrate renewable energy, modernize energy sectors, and create policies that enable sustainable energy markets to flourish. As more countries aim to achieve net-zero emissions by 2050 and reduce hazardous waste, SURE’s Innovation Fund supports clean energy technology, energy efficiency innovation, and a circular economy for renewable energy equipment.

Date 
Wednesday, July 8, 2020 - 1:30am

Last updated: June 15, 2022