Cristian Pons-Seres de Brauwer, who is a visiting PhD student at IMES, together with colleagues Elizabeth Côte, Mak Đukan and Rolf Wüstenhagen, have a new article out in Energy Policy. It is titled 'The price of actor diversity: Measuring project developers’ willingness to accept risks in renewable energy auctions'.
Renewable energy (RE) auctions were partly introduced to lower the cost of policy support. However, policymakers are increasingly aware that effective policies require a broader set of objectives that include securing actor diversity and social acceptance. While several countries have introduced measures to incentivize citizen participation in RE projects to meet those objectives, little is known about their effect on the risk perceptions of developers in auction settings. Based on insights from 559 experimental choices made by 61 European project developers, this study investigates risk-return preferences for different onshore wind energy auction designs. We show that developers are willing to accept the requirement to submit bid bonds up to a certain threshold, and that a 36-month realisation period is preferred overall. While developers may be open to citizen co-investment, the risk premiums they require increase with the share of capital offered to local residents in auction settings, highlighting an apparent trade-off between promoting actor diversity and low-cost RE deployment. Policymakers unwilling to compensate developers for the price of increasing actor diversity may have to find other ways to promote citizen participation in order to achieve RE objectives, as this factor may have important implications for the acceptance of RE deployment.