Former EON and Crown Estate insider, Matthew Bleasdale, here shares his initial thought on the current trend towards Auctions in promoting the clean technology sector.
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Although some big players favour them, problems with the Danish Offshore Leasing round has highlighted a potentially flawed model.. Here is his high level appraisal of Hydrogen’s emulation of an Offshore Wind-inspired strategic auction-based approach.
It’s frustrating that people keep talking of auctions. Their disruption is so major they may be the best example of Hayek’s warning on market interference, while being the worst example of Keynes’s case for stimulating markets (they minimise the profits as far as possible – in the case of the UK’s CfD AR2 so far it extracted value from the market rather than putting it in!)
Auctions are great for goods that require price discovery, not good for commodities (which is why those are traded in markets.)
When regulators and policy makers realise that their job is to make the sectors they want stimulated attractive (profitable), to minimise barriers to entry, and to reduce administrative burden, then we might start to see effective mechanisms put in place – though that will require them to understand what is an effective mechanism, and that auctions aren’t!
The real question is – why are auctions so prevalent? I suspect the answer to that is manifold:
– They are easy to understand
– They have results that create headlines
– Those headlines naturally are likely to continuously trend downward
– They require a lot of administration
The first three are ideal for politicians while the last is gold to civil servants
Finance for the Green economy
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