Renewable energy auctions in Turkey: Auction design based on stakeholder opinions

Abstract

The increased competitive power of electricity generation from renewable energy sources (RES) against fossil fuels has aroused debates on the fiscal burden that policy-based subsidies put on the public funds. During this period, market-based mechanisms, the auction mechanism in particular, have become increasingly popular. Success of an auction mechanism depends to a large extent on how well design choices are adapted to the specific context of a country. Drawing on stakeholder views on Renewable Energy Source Zones (YEKA) auctions, this article aims to evaluate the auctions mechanisms and propose policy recommendations for enhancing their efficiency and effectiveness. Research findings show that despite the continuing relevance of the feed-in-tariff (FiT) mechanism for the development of the RES sector, today financing costs of renewable energy projects are high and market predictability is low. The FiT mechanism should be retained after the policy change concerning the tariffs, which is expected to take place in 2020, and the future auctions should be smaller in volume and be distributed across different geographical regions. Although large-volume auctions are organised in Turkey, satisfactory conditions for competition have came into being and prices lower than FiTs were formed.