Industry concerned about auction system for solar power

London

THE latest mechanism designed to support solar power is proving wildly successful in squeezing down the cost of energy. It's also threatening to destabilise the renewable-energy industry.

From India to Mexico and the United Arab Emirates, authorities are moving away from making fixed subsidy payments for clean energy and towards a system of auctions. The new system forces companies to compete for contracts to sell electricity and has resulted in offers to supply photovoltaic power at record-low rates this year. Bigger markets including Germany and Japan will start the practice next year.

Governments shifted towards auctions to rein in the uncontrolled booms that came everywhere that traditional subsidies were tried. While the new mechanism has produced a bonanza of contracts for well-capitalised developers, industry executives are concerned that many of…