18
3 Practical Literature Review for Establishing the Current Renewable …
the applicable support mechanisms available in the relevant APAC markets for
new large-scale renewable energy projects.
3.2.1 The Auctions and Renewable Energy Policy Instruments
Auctions are becoming the most utilized support policy for the allocation of largescale renewable energy projects. An auctioneer determines a certain amount of
renewable capacity or energy to be built in a specific period. The auction will
determine which renewable energy developer will be able to deliver the project
on time for the lowest amount of support. The renewable energy developer can
be awarded the project based on the lowest price. This is a “pure-price” based
auction. The allocation can also be based on several criteria, also called a “beauty
contest”. An auction is not a support mechanism as such. It is only one element
of a wider general support system. Feed-in tariffs can still be used as the main
support instrument while the auction is used to allocate the project to the most
cost-effective project developer (Alterman 2018).
The auction system provides an advantage to both the auctioneers and the
renewable energy project developers. In case of product-based strategy, the auction leaves the opportunity for the renewable energy project developers to propose
flexible resources to comply with the electricity market product requirements (i.e.
storage system…) (Heiligtag et al. 2018).
In Europe, the renewable energy market has seen the energy policy instruments
transitioning from fixed feed-in tariffs (Germany 1991–2016) to competitive auctions with subsidies (UK from 2015) and very recently to subsidy-free tenders
(Netherlands from 2017). The auction systems with subsidy-free and marketbased premium will become the standard by 2030. The market is currently
adapting to this new policy landscape where the remuneration value is linked
to the competition level (Enel 2016). The shift in policy instruments create new
risks for the renewable energy projects developers. The auction system increases
the allocation risk. It also exposes the developers and investors to the volatility of the electricity market price (AURES Consortium 2019). Consequently,
renewable energy project developers are now exposed to merchant risk as their
revenues is linked to the wholesale electricity market price. Renewable energy
project developers are pushed to increase the quality of their revenue design.
A trend towards corporate power purchase agreements (PPAs) can be observed
in some markets, in Europe, US and in the APAC region (CNREC 2019).
In this context, hydrogen production from renewable electricity becomes another revenue stream for large-scale renewable energy project developers. The
3 Practical Literature Review for Establishing the Current Renewable …
the applicable support mechanisms available in the relevant APAC markets for
new large-scale renewable energy projects.
3.2.1 The Auctions and Renewable Energy Policy Instruments
Auctions are becoming the most utilized support policy for the allocation of largescale renewable energy projects. An auctioneer determines a certain amount of
renewable capacity or energy to be built in a specific period. The auction will
determine which renewable energy developer will be able to deliver the project
on time for the lowest amount of support. The renewable energy developer can
be awarded the project based on the lowest price. This is a “pure-price” based
auction. The allocation can also be based on several criteria, also called a “beauty
contest”. An auction is not a support mechanism as such. It is only one element
of a wider general support system. Feed-in tariffs can still be used as the main
support instrument while the auction is used to allocate the project to the most
cost-effective project developer (Alterman 2018).
The auction system provides an advantage to both the auctioneers and the
renewable energy project developers. In case of product-based strategy, the auction leaves the opportunity for the renewable energy project developers to propose
flexible resources to comply with the electricity market product requirements (i.e.
storage system…) (Heiligtag et al. 2018).
In Europe, the renewable energy market has seen the energy policy instruments
transitioning from fixed feed-in tariffs (Germany 1991–2016) to competitive auctions with subsidies (UK from 2015) and very recently to subsidy-free tenders
(Netherlands from 2017). The auction systems with subsidy-free and marketbased premium will become the standard by 2030. The market is currently
adapting to this new policy landscape where the remuneration value is linked
to the competition level (Enel 2016). The shift in policy instruments create new
risks for the renewable energy projects developers. The auction system increases
the allocation risk. It also exposes the developers and investors to the volatility of the electricity market price (AURES Consortium 2019). Consequently,
renewable energy project developers are now exposed to merchant risk as their
revenues is linked to the wholesale electricity market price. Renewable energy
project developers are pushed to increase the quality of their revenue design.
A trend towards corporate power purchase agreements (PPAs) can be observed
in some markets, in Europe, US and in the APAC region (CNREC 2019).
In this context, hydrogen production from renewable electricity becomes another revenue stream for large-scale renewable energy project developers. The