The governance of renewable energy auctions and the convergence of liberalized and non-liberalized electricity markets

In the last few years, the use of auctions has gained a momentum in the electricity sector, they have widely diffused. Economic and policy research has focused on the diversity of auction design involving criteria such as technological neutrality or specificity, restrictive conditions for developers, ceiling prices, socio-economic objectives, etc. Although existing case studies provide rich information on the actors that implement auction regimes, this aspect has still not been studied for itself. In other words, we are still missing insights on the governance of auctions. This paper provides an explanatory framework for the governance of auctions from the public administration and governance perspective looking beyond the design of the auction. Governance of auctions refers to the ‘who does what’ in the auction regime. More broadly, it relates to the extent and modalities of public authority engagement in the auction regime. We identify two dimensions: regulation and coordination. On the one hand, the public authority decides to impose (or not) a series of criteria on bidders (technology, capacity, socio-economic development, etc.) in order to steer industrial forces and thus control the evolution of the sector through ex-ante rules (regulation). On the other hand, the public authority may coordinate the actors involved in the different tasks and decisions that intervene in the implementation of auction projects in order to facilitate its completion, for example by coordinating land permits and grid interconnection obtention (coordination). We base our empirical investigation of auction governance on a most-different case comparison, involving Great Britain and Morocco, two countries differing widely regarding various relevant factors, in particular the extent of liberalization of the electricity sector, the political economy of the sector and the type of political regime. The research considers the recent historical experiences with renewable energy auctions and shows, in both countries, the proactive deployment of regulation to achieve broad socio-economic benefits - beyond just competitive price. This reveals a convergence across both highly and little- liberalized sectors towards the inclusion of multiple policy objectives related to the electricity sector. This also shows the auctions’ hybrid character, their capacity to strike a middle ground between authority and market, allowing both governments in liberalized systems to steer private investment in politically desirable directions that would not be fostered by the market alone (e.g. inclusion of socio-economic development criteria) and to tap into the private forces in little liberalized systems in order to foster the development of generation capacity, particularly needed in developing countries. Both cases also show the significance of coordination in facilitating the delivery of projects in areas like local value chain development, land (and continental shelf) management, and the investment on the grid. Finally, we consider the implications for the future political economy of the electricity industry, as new governance tools attenuate the distinctions between liberalized and a non- or partially liberalized industries.