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Competitive Tendering for Renewables and Industrial Decarbonisation
Competitive tendering of state aid is a tool for governments to ensure that aid is awarded efficiently and at the least cost for public finances. In the context of aid for investment in renewables and industrial decarbonisation, competitive bidding offers important advantages over administratively set support schemes: it improves cost-effectiveness by keeping support close to each project’s funding gap; it enhances efficiency by selecting the projects with the highest social value; and it supports transparency, limiting the scope for regulatory capture. This note discusses auction and contract design principles, with an emphasis on how to ensure effective competition and on recent developments in addressing bidder and project heterogeneity, risk, and multi-source funding.
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