Reaching India’s Renewable Energy Targets: Effective Project Allocation Mechanisms

The report finds that while renewable energy auctions are generally cost-effective and fair in project allocation, they often suffer from low deployment due to poor risk management. By analyzing 20 global auctions, the study identifies that project risks (such as transmission and land acquisition) have a greater negative impact on deployment than auction-specific risks. The authors recommend a 'controlled environment' for introducing wind energy auctions in India, including pre-identified sites and resource assessments, alongside the use of strong penalties for non-commissioning and payment guarantee mechanisms to ensure financial viability.

• Renewable energy auctions are almost consistently cost-effective, with discovered tariffs typically lower than baseline feed-in tariffs, achieving savings of up to 58%.
• Deployment effectiveness is generally low, with 75% of the studied auctions achieving less than 25% of the intended capacity deployment.
• Project risks—those affecting all procurement mechanisms—have a significantly higher negative impact on deployment effectiveness than risks specific to the auction process, with approximately 60% greater negative impact.
• Auction design risk is the primary factor affecting cost-effectiveness, particularly when the design fails to encourage sufficient competition for the auctioned capacity.
• Deployment is negatively impacted by flawed tariff determination, such as the 'L1 process' where all winners must match the lowest bid, which can force developers to commission projects at a loss.
• Auctions generally result in fair project allocation when they include design features like limits on capacity per bidder to prevent market concentration.
• Financial risk and off-taker risk can be mitigated through payment guarantee mechanisms, which were a key driver of high deployment in India's JNNSM solar auctions.
• To address developer resistance and high completion/technology risks in the Indian wind sector, auctions should be introduced in a 'controlled environment' with pre-identified sites and completed resource assessments.
• Underbidding risk can be effectively managed by imposing strong penalties for failure to commission projects on time.

APA

Shrimali, G., Konda, C., Farooquee, A. A., & Nelson, D. (2015). Reaching India’s Renewable Energy Targets: Effective Project Allocation Mechanisms. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2015/05/150512_Auctions_FINAL.pdf

Chicago

Shrimali, Gireesh, Charith Konda, Arsalan Ali Farooquee, and David Nelson. Reaching India’s Renewable Energy Targets: Effective Project Allocation Mechanisms. Climate Policy Initiative, 2015. https://www.climatepolicyinitiative.org/wp-content/uploads/2015/05/150512_Auctions_FINAL.pdf.

Wikipedia

{{cite report |last1=Shrimali |first1=Gireesh |last2=Konda |first2=Charith |last3=Farooquee |first3=Arsalan Ali |last4=Nelson |first4=David |title=Reaching India’s Renewable Energy Targets: Effective Project Allocation Mechanisms |publisher=Climate Policy Initiative |date=May 2015 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2015/05/150512_Auctions_FINAL.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{shrimali2015reaching, author = {Shrimali, Gireesh and Konda, Charith and Farooquee, Arsalan Ali and Nelson, David}, title = {{Reaching India’s Renewable Energy Targets: Effective Project Allocation Mechanisms}}, institution = {Climate Policy Initiative}, year = {2015}, month = may, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2015/05/150512_Auctions_FINAL.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }