Lamp, Stefan, Samano, Mario and Tiedemann, Silvana (2024) Firms' Bidding Behavior in a New Market: Evidence from Renewable Energy Auctions. In: 14th Toulouse Conference on the Economics of Energy and Climate, 6-7/06/2024, Toulouse School of Economics.

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Abstract

Auctions are increasingly used by governments to select suppliers and determine levels of policy support. In the context of renewable energy (RE) investment, they have become dominant in the ongoing energy transition. This paper makes use of unique bid-level data from German RE pay-as-bid auctions (2015-2019) to document bidding behavior of firms in this newly established market and recover bidders’ costs by estimating a structural model of multi-unit auctions. We show that bidding behavior has changed over time and explore alternative mechanisms driving the observed price
evolution and conduct counterfactual analyses to examine the impact of implementing a non-discriminatory auction format. Our primary findings indicate that adopting a non-discriminatory auction would have resulted in reduced subsidy expenses and mitigated market power. By identifying the factors influencing bidding prices and costs,
our empirical insights offer gui