Increasing Competition and Lowering Costs
Scaling Up Renewable Energy (SURE)
Countries can achieve historically low energy prices when energy providers compete in open and transparent procurement frameworks.
Regardless of market maturity, auctions help policymakers achieve sustainable cost reductions while spurring private investment, creating local jobs, reducing corruption in the procurement process, and reducing emissions. Compared to negotiated procurements, auctions allow for faster project execution and enable policymakers greater volume control and ease in scaling for multiple projects and rounds. Through a thoughtful and strategic design process, policymakers can take steps to attract robust competition and diverse bidders, mitigate risk with currency fluctuations, and prevent gaming and delays in project completion.
Defining a Renewable Energy Auction
An auction is a competitive procurement process that enables countries to find the most cost-effective renewable energy projects on the market. In an auction, energy project developers bid against each other to supply energy through long-term contracts at the lowest possible price. Awards are generally made based on bids submitted by participating energy providers according to transparent award rules. The energy industry also refers to an auction as a tender or reverse energy auction. Auctions are open to all eligible bidders and have clear award rules. This open and transparent process creates a level playing field for U.S. and other companies and safeguards against corruption.
Featured Resource
USAID Leadership
The experts from USAID’s Scaling Up Renewable Energy (SURE) program provide a full range of services to prepare for, design, and implement auctions, making sure that our partners are supported in every step of the process. Since 2017, SURE has supported nine renewable energy auctions. By choosing an open, transparent, and competitive procurement process, USAID partner countries are accelerating the transition to a clean energy economy while reaping social and economic benefits.
In 2020, SURE helped the Solar Energy Corporation of India release two system-friendly renewable energy procurements to lower generation and integration costs—major milestones in the country’s transition to a renewable energy future. The projects are a combination of renewable technologies and storage, which will bring 1.6 gigawatts (GW) to the grid, over $1 billion in investment, and reduce greenhouse gas emissions by 17.6 million metric tons of CO2 emissions (tCO₂e).
In 2019, SURE supported an auction in Colombia that awarded 1,374 megawatts (MW) of new wind and solar power projects that will attract roughly $1.3 billion in private investment and save up to $184 million in annual electricity costs.
Planning Auctions
Conducting auctions without adequate planning will not achieve low prices and power system integration. SURE technical experts conduct market and regulatory analysis and help policymakers design auctions that meet the unique needs and goals of each country. SURE also develops environmental and social impact assessment frameworks for renewable energy development.
Implementing Auctions
Auction implementation involves more than collecting and ranking bids. SURE technical experts help with market-building measures by preparing energy providers to bid in the auction and ensuring the same information is accessible to all bidders to ensure transparency and fairness. SURE works with the auctioneer to develop an auction announcement, timetable, auction manual, conducting training and auction simulations to bidders and financial institutions, and holding a pre-bidding conference.
SURE provides advisory support on drafting documents such as auction bylaws, auction announcements, power purchase agreements and technical grid interconnection requirements. We can share model templates for power purchase agreements, time-of-day/time-of-year block auctions, auctions including storage, and feed-in premium auctions and work with the auctioneer to tailor them to the country’s needs.
Bidding models and platforms are important elements of a successful auction. SURE can procure off-the-shelf platforms, customize as needed, and train personnel to manage it. In Mexico, USAID led the development and operation of an online auction platform that ensured the tender process was transparent and competitive. For the third auction, USAID developed a clearinghouse for contracts and guarantees and its operational guide. The clearinghouse acted as an intermediate single buyer and seller mechanism to streamline the process and reduce the risk of administrative or legal problems for both the buyers and sellers. USAID also supported the regulator to create an IT system that allocated clean energy certificates to clean energy generation and managed compliance with clean energy obligations.
Strengthening Regulatory Frameworks
SURE supports the design and adoption of regulatory and legal frameworks that attract private investors. We provide technical guidance on competitive bidding process regulations, public-private partnership laws, and independent power producer laws. We also support the design and adoption of regulatory and legal frameworks such as competitive bidding process regulations, public-private partnership laws, and independent power producer laws.
Increasing Capacity of Local Partners and Thought Leadership
SURE provides tailored in-country or virtual training and workshops on current and emerging best practices as well as tools, white papers, case studies, and resources. SURE also shares best-practice examples of key documents, such as auction design terms, auction descriptions, requests for proposals, and power purchase agreements. We are committed to building local capacity to conduct successful auctions and supporting partners to transition to more widely accessible, affordable, reliable, and sustainable energy that spurs economic growth, powers health systems, and reduces emissions.
Resources
Scaling Up Renewable Energy through Auctions
USAID provides a full range of services to prepare for, design, and implement renewable energy auctions while making sure that partners are supported in every step of the process.
The Social Impacts of Renewable Energy Auctions
The social impacts of renewable energy projects must be fully considered to avoid harmful outcomes for the local community, and financial losses for the developers.
USAID Helps Open Mexico's Energy Market to Private Investment and Competition
With support from USAID, Mexico’s auctions injected competition, private investment, efficiency, and transparency into the sector while achieving some of the world’s lowest renewable energy prices.
Renewable Energy Auctions Toolkit
Country Programs
Colombia’s Clean Energy Future
Energy Auctions for Kazakhstan’s Green Economy
Despite being a fossil fuel–based economy with a surplus of energy for domestic consumption, Kazakhstan has a successful renewable energy auction program that is transforming its energy sector and diversifying its energy mix.
Institutional Framework for Auctions in Mexico
As part of its 2013 constitutional reform, Mexico implemented a major restructuring of its power sector which, with assistance from USAID, resulted in some of the world’s most competitive renewable energy prices.