At increasing shares of renewable electricity, policy makers have a growing interest in ensuring a low-cost integration of renewables into their energy system.

Renewables, especially variable renewable technologies, cause integration costs. These include balancing costs due to deviations from day-ahead production forecasts, grid-related costs due to the location of renewables plants being resource- rather than load-related, and profile costs caused by the tendency of variable renewables to generate at the same time, thus reducing the market value of their electricity (Hirth et al., 2015).

Better system integration of renewable electricity may be ensured by steering the geographical distribution of renewables installations, the timing of their generation, or by subjecting them to forecasting and balancing requirements. Typical measures applied to other parts of the electricity system include requiring conventional plants to generate more flexibly, coupling electricity and heat markets, and introducing demand side response mechanisms.

In order to include system integration as a secondary objective in your auction, you can implement the following design elements:

1) Remuneration award metric sensisitve to electricity market prices

Remuneration is paid in the form of a FIP (fixed or sliding) or investment grant based on a reference electricity price (see also AURES Policy Memo 3), thus incentivising producers to design their plants to have low correlation with other plants’ generation profiles. Under current state aid regulation, generation-based support is required to be paid in the form of a FIP in EU Member States.

2) Deep connection cost charging

Bidders are required to bear the full cost of connecting their planned installation to the grid (deep charging approach).