Institutional and macroeconomic stability mediate the effect of auctions on renewable energy capacity

Decarbonizing the global energy matrix through investments in renewable energy (RE) is considered a pathway to mitigate the effects of global climate change. Auctions have become an increasingly popular policy instrument for this purpose. In the last few years, auctions have been rapidly adopted by low- and middle-income countries due to their flexibility and several theoretical advantages to mitigate risks deriving from poor business environments. Auction mechanisms bring the promise to promote investments in RE while capping support costs. Accordingly, many low and middle-income countries have rapidly adopted this policy instrument in the last decade. Nevertheless, the effectiveness of tendering schemes has been mainly assessed in OECD or European countries, where the business environment is generally stable. In this paper, presented a quantitative evaluation of RE auctions, exploring if the effectiveness of this policy in fostering RE capacity varies according to the quality of the business environment (defined as a combination of macro-level stability and institutional quality).