Auctions for all? Reviewing the German wind power auctions in 2017

Journal article, 2019

In 2017, Germany introduced auctions to determine the support level for onshore wind power. To protect small-scale actors, citizens’ energy cooperatives were allowed longer realization periods and did not need to have an approval pursuant to the Federal Immission Control Act to submit a bid. Winning cooperatives were given the highest accepted bid, while other participants were paid-as-bid. The aim of this paper is to examine how this auction design affected actor diversity and the risk of winning projects not being realized. Unexpectedly, the outcome of the auctions was that over 90% of the winners were cooperatives, and the average project size of their bids was twice the size of other winning bids. There was also a significant decrease in the highest accepted bid, from 5.78€ct/kWh in the first auction, to 3.82€ct/kWh in the third auction. However, the pricing rule combined with uncertain technology costs and strong competition, may have encouraged overly aggressive bidding. This, as well as cooperatives being exempt from having an approval pursuant to the Federal Immission Control Act, could increase the risk of winning projects not being realized. A conclusion is that special rules for small-scale actors, should be used with caution, especially if they give significant competitive advantages and may affect realization rates.