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Published: 4/3/2020. Updated:

NERC: new auction for the allocation of quotas for the promotion of the development of electricity production from renewable sources is being prepared


Regarding practices of a technologically-neutral auction organised for the first time last year and to further clarify the procedures of the auctions for promotion of the allocation of quotas, the National Energy Regulatory Council (NERC) has revised the Regulation of Auction of Incentive Quota of Electricity Production of Renewable Sources.

Substantive revisions to the Regulations of Auctions

Revisions to the Regulations of Auctions will allow avoiding excessive administrative procedures for organising a new auction for the allocation of quotas for the promotion of the development of electricity production from renewable sources to be announced on 29 May 2020.

If the bidders offer 0 EUR/MWh uniform price premium in Stage I of the Auction, the bidder with the largest annual production will be recognised as the potential winner. In the event of overlap in annual production amount, the incentive quota will be divided among these participants in proportion to their stated annual production. Stage II was announced earlier in such cases.

In order to ensure that the participants in the Auction correctly submit bids on preferred price premium on electricity prices in the market, the NERC has developed a special form. Optionally, if necessary, revised bids for Stage II of the Auction will be available for a longer period of 5 workdays (5 calendar days to date).

Additionally the NERC will be able to request information from the participants in the Auction for clarification/explanation of the documents or to contact the relevant authorities and/or energy companies for verification of the data on the participants in the Auction.

A new auction for the allocation of incentive quota

The allocation of a quota of 0.7 TWh of electricity production from renewable sources is intended in the new auction of incentive quota of electricity production. The Auction is technologically neutral and all technologies – solar, wind, biogas, and biomass can participate in the Auction.

Until 29 April the NERC will set the maximum price and not later than 29 May 2020 the reference price and the conditions of the new Auction, which will also include the maximum price premium that the participants in the Auction will be able to bid on.

Within 70 calendar days after the announcement of the start of the Auction by the NERC, those who wish to participate in the Auction (1) must obtain preliminary conditions of connection, agree on the guarantee of the fulfilment of obligations, and sign a letter of intent with the electricity grid operator and (2) perform calculations and prepare a bid on preferred price premium on the market price.

The participants in the Auction will be able to bid for a preferred price premium which may be equal to or less than the maximum price set by the NERC, but not less than 0. The winner will be selected based on the proposed lowest price premium.

Determination of the price premium of the winner in the Auction

The participants of the Auction compete for the possibility of obtaining a state promotion of a price premium to electricity prices on the market for a period of 12 years.

Example of an incentive scheme: maximum price, reference price and price premium to be paid to the winner(s)

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The maximum price premium of the winner, which is the object of the Auction, is calculated as the difference between the maximum price and the reference price. The price premium paid to the winner may not exceed the maximum price set by the NERC (the maximum price remains unchanged throughout the 12-year promotion period).

The specific price premium paid to the winner will depend on electricity prices on the market: if the price of electricity on the market exceeds the maximum price set by the NERC, the premium will not be paid because the entity will cover the cost from the price on the market.

Auction stages planned by the NERC:

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IMPORTANT. In the event of the quarantine extension in Lithuania, the NERC is considering the possibility of submitting auction documents and bids for the price premium remotely by electronic means. The procedure for submitting documents will be published together with information on the Auction.