Conference Agenda

Auction design has played a central role in shaping renewable energy markets globally. We study the effect of auction format changes on the prices and efficiency in the procurement of green energy using data on the universe of solar procurement auctions in India from 2015 − 2021. Exploiting variation in auction formats at central and state levels, we find that open (reverse) auctions lower tariff bids by 8–17 percent relative to sealed-bid formats. Markups, measured viabid-to-cost ratios, are 11–20 percent lower under open auctions. We argue that the resulting deviation from the revenue equivalence theorem arises from interdependent cost structures and present causal evidence of presence of winner’s curse. In the presence of interdependent cost structures, the information revelation inherent in open auctions results in lower tariff bids relative to sealed-bid formats. Structural estimates with interdependent costs corroborate the causal findings, showing a 16.12 percent reduction in winning bids under open format relative to sealed format. Considering the 104 open auctions conducted during this period, total government savings over the 25-year contract horizon are estimated at approximately 5.52 billion USD. Together, these findings highlight the efficiency gains from open auctions in the procurement of green energy and suggest that such formats can accelerate the global transition to a cleaner future.

This study investigates how firms' market power in the day-ahead electricity market influences the performance of incentive-based demand response (DR) programs during the balancing period. We demonstrate that market power in the day ahead increases the marginal cost of DR, thereby reallocating resources from DR to thermal generation in the balancing market. The distortions in the day-ahead market spill over into the balancing market, creating additional social costs. We further investigate the case where some firms in the day-ahead market own thermal generation resources that can be used during the balancing period. The results indicate that strategic firms have the incentive to manipulate the baseline consumption level downward in the day ahead to increase their integrated profits across markets, which contrasts with consumers' incentive to inflate the baseline to gain more revenue. Procompetitive policies in the day-ahead market alleviate the distortions caused by firms' strategic behavior across markets.

The energy transition requires investments in low-carbon generation and storage, but risk-averse, private investors face growing, hard-to-hedge risks in incomplete electricity markets. Hybrid market designs that add Capacity Remuneration Mechanisms, Contracts for Difference (CfDs), and other instruments improve risk sharing, but their efficiency in systems with high shares of renewables and storage remains under-quantified. This paper fills this gap by introducing Financial Twins: financial contracts that generalize Financial CfDs to all assets—including storage and demand—and replicate each asset’s profit stream. We show that a hybrid power market design with one Financial Twin per technology is first-best in a two-stage stochastic equilibrium model with investment and contracting under uncertainty followed by spot trading. In an application to the Spanish market, we rank instruments using Shapley values and find that Financial Twins for generation and demand create more value than those for storage, suggesting policy priority for these technologies.

The global transition to sustainable energy systems has accelerated the rise of renewable energy communities, where individuals or entities share energy infrastructures. These communities foster local energy production, democratic governance, and social equity while promoting energy security, resilience and climate-change mitigation. This paper applies club theory (Buchanan, 1965) as an analytical framework, offering insights into voluntary participation, congestion management, exclusion mechanisms, and the determination of optimal membership size in energy communities. By framing energy infrastructures as club goods, the study demonstrates how efficiency, equity, and long-term viability can be achieved through well-designed governance structures. We assume that club members are homogeneous who possess identical preferences and resources, and that club managers compete to attract members. In such a competitive game, each club manager makes optimal choices that maximize the utility of the representative club member.

We examine two settings. To derive key economic insights regarding the important role that membership size plays in the optimal configuration with multiple club facilities, we first assume that the renewable resource is not subject to exogenous climate shocks. Later, this simple setting is extended to account for the fact that renewable resources (e.g., solar energy) are intermittent. We focus on solar energy production. We introduce uncertainty and demonstrate how the club manager chooses one of two competing technologies (single source or hybrid) ex-ante and the economic arrangement that takes place ex-post. Under uncertainty, we assume that there are two possible states of nature, sunny and cloudy. The results of the analysis produce crucial insights about the complex nature of energy clubs as these entities provide multiple sharing facilities in stochastic settings.