Design elements of renewable energy auctions
Addressing the challenges posed by the current design of national tenders for the development of renewable energy, particularly wind energy, requires a multifaceted approach that not only focuses on price but also incorporates environmental, social, and supply chain resilience considerations.The goal is to foster a more sustainable, resilient, and competitive wind energy industry that can meet the targets for renewables.
Here are three potential action items to improve the situation:
1. Establish comprehensive criteria for renewable energy tenders.
Action Description:
Develop and implement criteria for renewable energy tenders that go beyond price considerations to include environmental and social standards, as well as supply chain resilience. These criteria should reward projects that demonstrate high environmental performance and social responsibility and contribute to a robust and resilient supply chain. Incorporating non-price criteria such as lifecycle carbon emissions, social labour standards, and supply chain sustainability can help ensure that tenders reflect the true value of renewable energy projects.
Implementation Steps:
Collaborate with industry stakeholders, and experts to define comprehensive, standardised non-price criteria.
Integrate these criteria into the regulatory framework for renewable energy tenders, ensuring they are mandatory for all Member States.
Provide guidance and support on implementing these criteria in their national tenders.
2. Introduce mechanisms to mitigate the risks associated with uncapped negative bidding.
Action Description:
Implement regulatory mechanisms to address the risks and uncertainties introduced by uncapped negative bidding in offshore wind tenders. These mechanisms could include setting a cap on negative bids, introducing more robust non-execution penalties, or designing incentive structures that ensure project completion and delivery. The aim is to balance the need for competitive pricing with the assurance of project feasibility and timely completion.
Implementation Steps:
Analyse the impact of uncapped negative bidding on project delivery and the achievement of renewable targets.
Propose regulatory amendments to introduce caps on negative bidding or enhance penalties and incentives for project completion.
Engage with industry stakeholders to assess the potential impact of these changes on the competitive landscape and investment planning.
3. Harmonise auction design and encourage investment in supply chain resilience.
Action Description:
Work towards harmonising the design of renewable energy auctions to reduce complexity and uncertainty for manufacturers and investors. This harmonisation should include standardised criteria for environmental and social standards as well as incentives for investments in supply chain resilience. Additionally, establishing a framework for supply chain resilience in the renewable sector could include financial incentives, support for research and development, and collaboration platforms for stakeholders.
Implementation Steps:
Conduct a comprehensive review of auction designs across Member States to identify best practices and areas for harmonisation.
Develop a set of standardised auction design principles that include incentives for supply chain resilience.
Launch initiatives to support research, development, and investment in supply chain innovations and resilience-building measures.
Expected Outcomes:
These actions aim to lead manufacturers to a more stable and predictable investment environment, enhance the environmental and social sustainability of renewable energy projects, and ensure that we remain on track to meet its 2030 renewable energy targets. By addressing the current limitations of tender designs and fostering a more integrated worldwide approach, these actions aim to support the growth of a competitive and resilient wind energy industry.