POTENTIAL IMPLEMENTATION RISKS IN THE PILOT ENERGY EFFICIENCY AUCTION IN RORAIMA

The report analyzes a pilot energy efficiency (EE) auction in Boa Vista, Roraima, identifying risks related to auction design, measurement and verification (M&V) methodologies, and the misalignment of incentives for electricity distributors. It suggests that the unique energy situation in Roraima—which is not part of the National Interconnected System and relies on expensive diesel plants—makes it a suitable pilot site but may limit the external validity of the results for other Brazilian states. Key recommendations include moving to open second-price auctions to avoid the 'winner's curse' and considering synthetic control methodology for M&V to maximize EE potential.

• The pilot auction in Boa Vista is designed with eight lots: one for public lighting and seven 'broad competition lots' targeting residential and commercial consumer units. Bidders submit sealed bids for the price they wish to receive per megawatt-hour of avoided energy, with the lowest bidder winning if their price is at least 5% lower than others.
• The use of a 'sealed envelope' format creates a risk of the 'winner's curse,' where bidders may submit excessively low bids to ensure victory due to an inability to predict costs and risks, potentially making the project infeasible for the winner and detrimental to consumers.
• The chosen M&V methodology, Randomized Control Trial (RCT) using difference-in-differences, risks limiting the overall impact of energy efficiency measures because actions are restricted only to the treatment group, leaving potential gains in the control group unexplored.
• There is a fundamental misalignment of interests because electricity distributors, who buy the avoided energy credits, have revenues tied to total electricity consumption, meaning energy efficiency policies effectively lower their own profits.
• The pilot may lack external validity for the rest of Brazil because Roraima's atypical energy situation—being the only state not part of the National Interconnected System (SIN) and relying on diesel-fueled thermoelectric plants—differs significantly from other regions.
• The report suggests that 'open second-price auctions' could mitigate the winner's curse and that 'synthetic control methodology' could be used for M&V to allow energy efficiency actions across entire lots without compromising energy savings projections.

APA

Schutze, A., Holz, R., & Assunção, J. (2020). POTENTIAL IMPLEMENTATION RISKS IN THE PILOT ENERGY EFFICIENCY AUCTION IN RORAIMA. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2020/08/Insight-Potential-implementation-risks-in-the-pilot-energy-efficiency-auction-in-Roraima.pdf

Chicago

Schutze, Amanda, Rhayana Holz, and Juliano Assunção. POTENTIAL IMPLEMENTATION RISKS IN THE PILOT ENERGY EFFICIENCY AUCTION IN RORAIMA. Climate Policy Initiative, 2020. https://www.climatepolicyinitiative.org/wp-content/uploads/2020/08/Insight-Potential-implementation-risks-in-the-pilot-energy-efficiency-auction-in-Roraima.pdf.

Wikipedia

{{cite report |last1=Schutze |first1=Amanda |last2=Holz |first2=Rhayana |last3=Assunção |first3=Juliano |title=POTENTIAL IMPLEMENTATION RISKS IN THE PILOT ENERGY EFFICIENCY AUCTION IN RORAIMA |publisher=Climate Policy Initiative |date=August 2020 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2020/08/Insight-Potential-implementation-risks-in-the-pilot-energy-efficiency-auction-in-Roraima.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{schutze2020potential, author = {Schutze, Amanda and Holz, Rhayana and Assunção, Juliano}, title = {{POTENTIAL IMPLEMENTATION RISKS IN THE PILOT ENERGY EFFICIENCY AUCTION IN RORAIMA}}, institution = {Climate Policy Initiative}, year = {2020}, month = aug, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2020/08/Insight-Potential-implementation-risks-in-the-pilot-energy-efficiency-auction-in-Roraima.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }