Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/263156 
Year of Publication: 
2022
Series/Report no.: 
DIW Discussion Papers No. 2013
Publisher: 
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
Abstract: 
Designing auctions that favor low resource quality installations allows countries to geographically diversify their renewable energy production, while lowering payments to low-cost producers. In this paper, we develop a stylized model showing that a discriminatory auction design favoring low-wind-yield locations leads to a tradeoff between production costs and producer rent and that the scheme can lower consumer costs even without considering the positive externalities of distributed generation. We explore the influence of the heterogeneity of production costs, the strength of the adjustment, and the regulator's knowledge about cost structures. Through a numerical analysis of the German reference yield model, we estimate that at current auction levels intra-technology discrimination through the reference yield model leads to a reduction of consumer costs of around 24.8 billion Euro or 13% between 2023 and 2030.
Subjects: 
climate policy
auctions
renewable energy
onshore wind power
reference yield model
JEL: 
D44
Q42
Q48
Q54
Document Type: 
Working Paper

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