Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/282859 
Year of Publication: 
2023
Series/Report no.: 
Tinbergen Institute Discussion Paper No. TI 2023-046/VII
Publisher: 
Tinbergen Institute, Amsterdam and Rotterdam
Abstract: 
Globally, governments increasingly rely on auctions to advance renewable energy. This paper studies the design of wind farm auctions and evaluates the impact of price guarantees and subsidies on auction efficiency, government revenue, and renewable-energy production. While the theoretical analysis suggests that the price guarantee has no effect, our laboratory experiment suggests that the price guarantee improves efficiency and that it often increases production and revenue. An important explanation for these results is that less risk averse subjects tend to bid less aggressively and produce less. Without the price guarantee, and hence with more uncertainty in the auction, this increases the chances that risk-loving bidders win the auction, thus compromising auction efficiency. The subsidy is less effective than suggested by theory. Bidders with a higher valuation tend to bid more conservatively than the equilibrium prediction, thus neutralizing the efficiency-enhancing effect of the subsidy
Subjects: 
Auctions
Experiments
Wind farms
Renewable energy
Document Type: 
Working Paper

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