Research

Contract design in renewable energy procurement auctions: Evidence from India

In procurement auctions, contracts set the post-auction investment terms. Under future uncertainty, incomplete contracts result in under-investment. This paper proposes contract design for Indian solar energy procurement auctions to help achieve their green energy targets at the lowest possible procurement costs. I estimate a model of firms' optimal bidding and deployment decisions under cost uncertainty. Using the auction and post-award deployment data, I recover the distribution of the firms' costs and show how the contract design influences procurement costs and deployment outcomes. The results show that the firms take the option of not deploying under high-probability cost scenarios, which leads to low deployment rates. The counterfactual analysis shows that incentive contracts with optimal selective bid indexing and penalties can achieve an 80% increase in deployment with a 3% increase in tariff.

Paper

How large are the cost savings from renewable energy auctions: Evidence from Germany (With Richard Sweeney)