Are auctions forecast to be the primary policy mechanism driving utility-scale renewable electricity capacity expansion?
Analysis from Renewables 2018
Yes. For the first time, more than half of renewable capacity to be commissioned over 2018‑23 will have fixed remuneration, set competitively, mostly through auctions.
Compared with last year’s forecast, the share of competitively set remuneration is higher, mainly because of China's policy transition from administratively set feed-in tariffs (FITs) to auction schemes for onshore wind and solar PV installations. China has already completed two utility-scale solar PV auctions for 8 gigawatts (GW) of capacity since 2016 and is expected to award larger capacities over the forecast period. In May 2018, the Chinese National Energy Administration announced the transition from FITs to auction schemes for onshore wind after 2020; as a result, competitive pricing is expected to drive almost half of utility-scale capacity deployment over 2018-23, especially for solar PV and onshore wind. Administratively set tariffs will continue to stimulate hydropower, offshore wind, bioenergy and CSP growth in China.
Utility-scale renewable capacity growth by remuneration type and region, 2018-2023
OpenOutside of China, competitive auctions drive two-thirds of renewable capacity expansion, but regional policy trends vary.
In the Asia-Pacific region, India implements auctions for all utility-scale wind and solar projects, while many Association of Southeast Asian Nations (ASEAN) countries are transitioning towards tendering out renewable energy projects. Remuneration for most hydropower projects is set administratively, as investment and project development in many developing countries and emerging economies is dominated by publicly owned, vertically integrated companies. In the United States, a federal auction scheme does not exist, but wind and solar projects normally compete with one another to offer lower prices for long-term power purchase agreements (PPAs) to public and private utilities and corporations.
EU countries have been transitioning to competitive auctions for utility-scale projects since 2016, whereas Middle Eastern countries implement auction schemes, except Iran, which is responsible for one-quarter of the region’s renewable capacity growth. In sub-Saharan Africa, South Africa awards projects through competitive tenders, but other governments in the region still regulate the remuneration of hydropower and geothermal plants. Meanwhile, auction schemes backed by multilateral development banks have emerged as a preferred policy to award new solar PV and wind capacity projects in many countries in the region, including Senegal, Zambia and Ethiopia.