Designing and Implementing Renewable Energy Auctions
Guidehouse assisted the Albanian government with the country’s first auction for onshore wind projects, resulting in 222 megawatts awarded.
The government of Albania has adopted the goal of 54.4% share of renewable energy in final energy demand by 2030, as reflected in its National and Energy Climate Plan (NECP, 2021). To help achieve this target, the government decided to implement renewable energy auctions, which are a competitive market-based mechanism to efficiently and transparently allocate public funding and to unlock and de-risk private sector investments. Guidehouse was on hand to support the government, drawing on our extensive experience of auction design and implementation.
Challenge
In 2020, the country of Albania decided to implement its first-ever onshore wind auction. Since 2019, Guidehouse has been part of a consortium contracted by the European Bank for Reconstruction and Development (EBRD) to assist the Ministry of Infrastructure and Energy of Albania (MIE) with the design and implementation of renewable energy auctions in the country. The EBRD runs a Renewable Energy Programme to create an enabling framework for projects and increase private sector participation.
Designing renewable energy auctions can be a complex task, particularly when a country is first introducing the mechanism. Additionally, Albania’s energy sector is undergoing a large-scale liberalization, encompassing the unbundling of entities and the establishment of a power exchange, as well as reform of its renewable energy law.
The complex and evolving policy, economic, and technical landscape must also be considered when designing the framework governing the auction. The policy objectives for this initiative included the efficient allocation of public funds, strong competition and transparency, and successful realization of the awarded projects.
Solution
Since the MIE conceived the concept of an onshore wind auction in 2020, Guidehouse has been there every step of the way. At the outset, our experts guided the MIE through the design elements of the competitive bidding process, advising on the design choices that would help the MIE to achieve its policy goals. Our experts prepared a comprehensive set of design recommendations, including the auction volume, bidder qualification criteria, project requirements, ranking rules, and so on.
The tender was implemented as a two-stage process. The first stage was a Request for Qualification (RFQ) to pre-qualify bidders with the required technical experience, financial resources, and legal standing to deliver a wind project. Once the RFQs had been evaluated, the second stage was a Request for Proposal (RFP) for each pre-qualified bidder to demonstrate the viability of its proposed site and to submit a financial offer.
Guidehouse worked closely with the MIE throughout both stages of the tender process to ensure the implementation of a fair, transparent, and competitive procedure.
At each of the RFQ and RFP stages, Guidehouse assisted with the detailed evaluation of bidder submissions, firstly to pre-qualify bidders and then to select the best offers to be awarded. We provided technical advice to interpret and apply the tender rules to enable the client to successfully conduct this complex competitive procedure.
Impact
The onshore wind auction attracted many participants, ensuring a competitive landscape. After the pre-qualification and qualification of bidders had been completed, the financial offers were opened in July 2023 and a total of 222.48 MW were awarded. Of note, the lowest-priced bidder offered €44.88/MWh for a 75 MW project, which is a record-low price in the region.
This auction marks a significant milestone for Albania in its energy transition and climate change response, as these results from the first-ever wind auction indicate that Albania is well-positioned to achieve its climate and energy goals. The country will also benefit from low-cost, renewable electricity generation at a time of global disruptions and high energy prices.