Auction Design for Wind Rights

The best sites for offshore wind farms on the US Outer Continental Shelf are scarce. To make the best use of this scarce resource, it is necessary to implement a fair and efficient mechanism to assign wind rights to companies that are most likely to develop off-shore wind energy projects. Coastal states, particularly along the eastern seaboard, are taking aggressive actions to spur the growth of an offshore wind sector in their states to help meet their renewable portfolio targets while nurturing the supporting on-shore infrastructure. This paper discusses the design of auctions for wind rights in which price is the sole factor of competition. A second paper, Ausubel and Cramton (2011), extends the analysis to auctions in which multiple factors are used in bid evaluation. This may be especially useful in settings where states (and potential bidders) have already taken actions to foster offshore wind development.