Measuring the benefits of cross-border renewable auctions in Central and Eastern Europe — The theoretical case of Hungary

Abstract

Economic theory suggests that significant benefits can be realized, if two or more countries integrate their renewable support schemes and capitalize on the lowest cost renewable energy projects in merged markets. Hungary is one of the Central and Eastern European countries having a legal obligation to open their renewable auction schemes to other EU member states. This paper provides a model-based assessment of what such a cross-border cooperation could mean for Hungary and its neighbouring countries. Economic benefits are calculated and presented for the participating countries according to three pairwise cases for cooperation. Based on these outcomes, the paper concludes with the policy considerations and recommendations to shape the design of the opened auction scheme.