Bidding on the Future: A Comparative Analysis of Offshore Wind Auctions in the UK and the Netherlands

Abstract: Auction systems have been around for a long time now, and they are proving to be a good support instrument to promote renewable energy technologies in most parts of the world. The key feature of an auction is its design flexibility, real price discovery through competition, transparency and greater certainty for investors and policymakers to achieve high-level targets.  This thesis uses specific design elements and assessment criteria for auction systems, set out in the literature, to perform a comparative analysis of the design elements of offshore wind auctions in the UK and the Netherlands to identify best practices in auctions that promote the development of offshore wind and provide recommendations to policymakers based on previous experiences in both countries.  The analyses show that strict selection criteria and penalties help improve effectiveness and static efficiency. Seal-bid auctions with multiple rounds and fixed schedules help to reduce uncertainty for investors. Financial prequalification in the form of seabed leases ensures that developers are serious about the project and improves realization rates. Physical prequalification should be set focusing on improving the supply chain in the region, socio-political feasibility, actor diversity, etc. However, it is advisable to exclude the EIA and grid connection from the scope of the developer as it helps reduce planning risks. It is important to have ceiling prices in offshore wind auctions, but a detailed study of the technological development and market condition needs to be assessed to set the right value and have it undisclosed for better competition. Separate budgets can be set for offshore wind auctions rather than have it based on capacity or electricity generation. This helps with better planning for the auctions. Support mechanisms should be designed to ensure that generators and consumers are benefited from them. Finally, a realization period should be set for projects to ensure they are aligned with national policy targets.