The use of non-price criteria in auctions for new offshore wind could help support a sustainable renewable energy sector which delivers long term value for society, according to the leading renewable energy company.
To contribute to the debate, SSE Renewables has published a short position paper on the use of non-price criteria. The paper separates out the type of criteria best suited for mature and new offshore wind markets; as well as those for an auction for seabed or for a CfD.
SSE Renewables has extensive experience of non-price criteria, having participated in auctions including ScotWind; the most recent Polish offshore license tender; and the Hollandse Kust West tenders in the Netherlands.
Alexandra Malone, Director of Corporate Affairs at SSE Renewables, comments:
“While the attractiveness of auctioning on the basis of lowest price is the belief that it will lead to the lowest costs in the short term, it doesn’t always reward the best site, project, or developer which often results in missing out on wider long term societal benefits – achieving industrial strategies; enhancing the environment; boosting innovation.
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“That’s why we support greater use of non-price criteria in offshore auctions. If designed and implemented properly, they can help deliver and maximise longer term benefits for society by rewarding the projects and developers on a wider basis than simply who can bid the lowest, or the most in the case of seabed auctions or negative bidding.”
In a series of key recommendations contained with the company’s position paper, SSE Renewables says today:
The use of non-price criteria (NPC) in auctions is important to deliver renewables projects which are deliverable, on time and on budget, and provide long term value to society and the environment.
NPC must be well-designed, carefully implemented, with transparent assessment and monitoring of commitments to avoid overcomplication and risk of legal challenges.
Seabed leasing auctions for offshore wind are best suited for use of NPC, as it is early enough in the development stage for commitments to be delivered; and avoids having to rely on purely financial bidding which risks adding to the cost of offshore wind.
The most appropriate NPC are track record and deliverability of projects. Beyond that, criteria related to sustainability (circularity; workforce and skills); ecological protection and enhancement; and supply chain development.
NPC in new offshore wind markets should be focused on deliverability and track record, and included as a pre-requisite to participate, rather than a point of competition.
More diverse non-price criteria are best suited to mature offshore wind markets where there will generally be more competition from developers to build a project.
It is more complicated to apply non-price criteria into offtake (CfD) auctions, with re-ranking of bidders the best approach to properly incentivise the right behaviour.
It is important that there is transparency of how successful bidders are scored against NPC; what commitments have been made; and how they will be held accountable for delivery at different milestones.
Following the publication of the position paper SSE Renewables will now engage constructively in discussions on this topic at a UK, European and global level through organisations such as Wind Europe, GWEC, and the Global Offshore Wind Alliance; as well as directly with governments and regulators.
Read more here as Alexandra Malone blogs on the importance of non-price criteria in renewables auctions and how the price isn’t always right when awarding seabed and CfD contracts.
