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

Strategic bidding in dynamic renewable energy auctions (With Richard Sweeney)

Reaching climate goals requires a green energy transition over time, necessitating phased procurement and making dynamics important for the auction design. This paper develops a dynamic auction model where forward-looking firms adjust bids strategically across multiple periods. We derive equilibrium bidding strategies, showing that bid markups depend on cost distribution, market composition, and continuation values. Comparing one-shot and two-period auctions shows a tradeoff: one-shot auctions involve higher bids due to larger auctioned quantities, while dynamic auctions allow firms to bid strategically over time. Our findings highlight how auction design influences procurement efficiency, emphasizing the need to account for bidder expectations to minimize costs and improve outcomes.

Draft upon request

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