1. Auctions for Renewable Electricity
Latin America Carbon Forum
Mexico City, October 20th, 2017
Veronica Irastorza
Associate Director

2. Globally, renewable auctions have pushed down prices
Prices have been falling
Brazil (2009-) Onshore wind, solar PV
India (2010-) Solar
South Africa (2011-) Solar, Onshore
Middle East (2011-) Solar
UK (2015-) multi-technology
Germany (2015-) Solar (2016/17-) Wind
Chile
Mexico (2016-)
Argentina (2016-)
Source: IRENA, 2017
Countries with RES auctions
Source: IRENA, 2014
Source: IRENA, 2017

3. Key design choices – Renewable Energy Auctions
Only price or multi-criteria
Format – e.g. sealed bid or descending clock
Verification
Bid bonds
Non-delivery penalties
To avoid bed-blocking/ speculative bidding
Pre-qualification?
Planning permissions, grid connections
Supply chain plans/ requirements
Long term contract at guaranteed price $/MWh
Single technology/Multiple technologies
Budget?
Multi-year?
location?
1.Product
2.Qualification
3.Competition
4.Delivery
Tensions – e.g. maximise competition to reduce costs vs. maximise delivery of environmental targets

4. Lessons learned 1. Define the “product” carefully
Long term contracts with guaranteed prices can help enable investments and finance, but transfer risks to Govt/consumers
MWh renewable electricity at lowest price?
Mature vs less mature technologies?
Reliable electricity? Chile (baseload, peak and non-peak)
Verification and incentives are crucial
3. Delivery is not guaranteed
Winner’s curse – esp. in pay as bid and one-off auctions
If cost of non-delivery is low (e.g. UK NFFO 1990s auctions – last round 15% delivered)
Planning or grid connections may not materialize (if not required for pre-qualification)
2. Access to finance and maturity
In Latin America, access to finance and the maturity of the market are key considerations for auction design, including contracts in USD:
Mexico wanted to ensure investments.
Argentina has had limited access to finance.
Chile is a mature market with good access to finance.
4. Competition is paramount
Denmark offshore wind 2010 Anholt – one bidder, one winner.
Move to technology neutral auctions to maximise competition. Mexico was highly competitive
High cost of entry may reduce competition
Be clear about forward schedule of auctions
pay as bid (Mexico, Argentina)
S Africa – auction 1 (2011) bids were close to the published max prices

5. Contact Us Veronica Irastorza Associate Director NERA Mexico
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NERA US Limited
All rights reserved.

6. Summary results Mexico SLP
Auction 1
Offers submitted
226
Winning bids 18
Energy awarded
Volume:
5.4 million MWh
Avg. price:
31.2 USD/MWh
CELs awarded
5.4 million CELs
16.5 USD/CEL
Auction 2
Offers submitted
321
Winning bids 56
Energy awarded
Volume:
8.9 million MWh
Avg. price:
19.23 USD/MWh
CELs awarded
9.3 million CELs
14.24 USD/CEL
Capacity awarded
1,184 MW
32,285 USD/MW
Energy + CELs Avg. Price:
Auction 1: 47.7 USD/MWh Auction 2: USD/MWh