Lower public auction

Lower public auction is a process by which an entity, generally the government, announces that it wants to purchase a certain amount of a product or service — in this case electricity from renewable sources — and solicits competitive bids so as to acquire it at the lowest cost — as regards renewables this is generally in dollars per Megawatt hour (MWh). This is generally accompanied by a requirement to purchase the electricity, and the difference is often centrally subsidized. Many Countries are now addressing this kind of policies in order to provide a support to renewable energy, with the aim to avoid a non controllable public expenses caused by a boom of installations generated by an appealing fixed tariff. Among others, South Africa is implementing this system for the construction of PV plants, as well as Brazil, where in 2011, reverse auction for new power generation capacity bids for 9.1 GW of wind power came in at $ 62/MWh, less expensive than conventional power alternatives, and than wind offering anywhere in the world. This made wind power the second cheapest energy source in Brazil. In 2012 this price dropped to € 35/MWh, way lower than the wholesale electricity price. The auction system is able to grant a significant cutting of renewable energy technology prices. On the other hand it implicates a consistent reduction of the profits.