Bidding Farewell to Fossil Fuels - An Empirical Study of Auctions for Renewable Energy Support

Abstract: Using government auctions to distribute subsidies and locations for renewable energy sources is a good way to receive signals about the cost of renewables. This thesis studies the relationship between auction design and auction prices in Renewable Energy Support (RES) auctions in Europe. The price outcomes of first-price and second-price auctions are compared empirically, as well as auctions with and without penalties or pre-qualifications. The empirical analysis finds that second-price auctions generate lower bids than first-price auctions, which in turn means lower subsidies. Studied from an auction theoretic perspective this could imply bidders in RES auction bid differently depending on how the auction is designed.