Price-based offshore wind auctions have significantly driven down the cost of offshore wind over the last decade. However, as offshore wind has become competitive with traditional forms of energy, many mature markets have started to use criteria other than price to assess bids. These non-price criteria (NPC) create more effective offshore wind markets as they can factor in social, environmental, and economic benefits, and avoid a race to the bottom among industry players.
Building upon our experience supporting auction design, we have identified four principles governments should follow to successfully introduce non-price criteria (NPC) into competitive auctions:
- Emerging offshore wind markets should use NPC to encourage the efficient delivery of projects, but avoid imposing excessive constraints or demands on developers and the supply chain.
- NPC which introduce additional complexity for market participants, (‘radical’ NPC), should only be used in established offshore wind markets.
- Policymakers should balance NPC with sufficient subsidies or other incentives to ensure their auctions remain attractive to market participants choosing between different international markets.
- A transparent and robust framework for evaluating bids is a critical component of NPC auctions.