Renewable Energy Auctions: Lessons from Private Investors in Thailand and Malaysia

The transition to competitive procurement has enabled governments to obtain the most competitive price for electricity from renewables. Market conditions now favor renewable energy, with electricity from renewables consistently cheaper than from fossil fuels. This shift is attributed to the decreasing cost of renewable energy technologies, particularly solar and wind power. In Asia, several countries have initiated renewable energy auctions to meet their clean energy targets. China, for instance, has made significant strides in renewable energy development, with 1 GW of renewable energy capacity added in 2015 and 5.5 GW in 2016. Thailand has also made notable progress, with biogas, biomass, and hybrid auctions held in 2016 and 2017. The country's first technology-neutral auction in 2017 targeted 300 MW of hybrid renewable energy power, with bids selected in December 2017. Malaysia has also been actively promoting renewable energy development through auctions. The country held its first solar auction in 2016 and a second solar auction in 2017, both of which were heavily oversubscribed. The first auction targeted 300 MW, while the second auction aimed for 460 MW. Winning bids represented 450 MW and 563 MW of total capacity, respectively. The USAID-funded CEADIR Activity has analyzed the private sector and investor experience in recent auctions in Thailand and Malaysia. The study aimed to understand how cost-effectively auctions have mobilized private investment and finance. The analysis also sought to gather perspectives from private sector participants and provide recommendations for improving and scaling up auctions in the coming years. Thailand's 2017 auction, in particular, was notable for its innovative policy and regulation framework. The Small Power Producers (SPP) Hybrid Program required producers to commit to firm power generation by combining renewable energy technologies to supply a defined amount of power during specified hours. This program was the first competitive bidding program in Asia to require "firm" power generation and the first to allow hybrid power projects to participate in an auction. The analysis of private sector perspectives and lessons learned from recent renewable energy auctions in ASEAN countries can provide valuable insights for policymakers and other countries developing plans and policies for auctions. By understanding the experiences and recommendations of private sector participants, policymakers can improve future auctions and mobilize more private investment and finance for renewable energy development.