Abstract
Geographically neutral renewable energy auctions incentivize investors to locate their plants in optimal locations to minimize their bid prices, but this concentration might result in substantial grid investments. Ultimately, maximizing the social welfare for consumers requires minimizing the sum of renewable energy auction subsidies and grid investments. We quantify the trade-offs between grid investment costs and auction subsidies in geographically neutral and geographically diverse renewable energy auctions. We find that consumer costs are minimized in geographically diverse auctions, e.g., when renewables are not only located in the most optimal regions and, thus, when the auction subsidies are not minimized.
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