Chapter 01 · Climate & transitionEnergy & Transition
Auction / tender
Definition
A process in which contracts, support payments or allowances are allocated through competitive bids rather than administratively set prices. In energy policy, renewable energy auctions award support to the lowest-priced qualifying bids; in emissions trading (for example the EU ETS), allowances are sold to market participants at auction.
References
Supports definition and framing.
Overview
What it means
Auctions have become the dominant tool for allocating renewable energy support because competition reveals real costs and has driven sharp price discovery for solar and wind.
Design choices — beyond-price criteria, bid bonds, ceiling prices, technology-specific pots, limits on single-player volume — determine who can participate, how fast projects are built, and whether co-benefits (community ownership, local content) are achieved.
How it is used
Dozens of countries run renewable auctions (the EU's state-aid guidelines make them the default support instrument); IRENA tracks global auction design and outcomes. Tenders are also used to procure green power, clean hydrogen and public works with sustainability criteria embedded in scoring.
Why it matters
Mechanism design decides whether clean-energy deployment is cheap and inclusive or captured by incumbents: under-designed auctions produce under-subscription or non-delivery, while well-designed ones have been a major driver of renewable cost decline.