Spain’s renewables auction next month is set to receive high levels of interest from solar bidders, according to industry observers, as the country’s government seeks to support the swift deployment of new capacity following a summer beset by record-breaking electricity prices.
The 3.3GW auction was announced by Spain’s energy and environment ministry two weeks ago, and prospective bidders have until 5 October to submit applications before the auction takes place on 14 October.
This short turnaround reflects government efforts to harness new renewables as a solution to rising electricity prices. The average price of electricity in Spain’s wholesale market has reached a new high on three consecutive days this week, rising to €132.47/MWh (US$156.5/MWh) today (Wednesday), according to data from market operator OMIE. That figure is three times higher than the average price seen on the first Wednesday of September 2020.
The energy and environment ministry said that results from Spain’s 3GW auction in January, which saw solar bidders awarded more than 2GW of capacity, show that the launch of new renewables projects can reduce the price of electricity.
Consequently, the ministry has reserved 600MW of capacity for projects that can be operational before the peak of summer 2022. That is in addition to 700MW reserved for large-scale solar and 1,500MW for onshore wind.
|Projects (PV and wind) that can be operational by the peak of summer 2022||600MW|
The auction is expected to be “very competitive and probably well oversubscribed”, said Michele Lauritano, senior consultant and partner at renewables consultancy Everoze, adding that slight differences in the rules compared to previous auctions mean there should be more opportunities for smaller players to take part.
Some 300MW of capacity will also be reserved for distributed PV projects up to 5MW. As well as reducing the need for new electrical infrastructure compared to larger installs, these projects are intended to encourage the participation of the public and small businesses in renewables deployment. At least 25% of the share capital of the company that owns these facilities will need to be held by a minimum of four owners that have a tax address less than 20km away from the installations.
Given the short timeframe between when the auction was announced and when it will take place, the 300MW of capacity reserved for these installations seems sufficient, said Rafael Barrera, director at Spain’s National Association of Photovoltaic Energy Producers (ANPIER), adding that tweaks could be made in future auctions to further support small-scale PV deployment.
“While the reserve of the auction for photovoltaic installations of local distributed generation is undoubtedly a good step in the right direction, we believe that it should be expanded in the next calls to a minimum of 25% of the capacity to auction,” Barrera said. ANPIER also proposes extending the distance of the tax address from the partners behind such projects from 20km to 100km so that the whole district or region where facilities are located is included.
The upcoming auction forms part of efforts by Spain’s government to add a further 60GW of renewables capacity by 2030. A new auction mechanism announced last year aims to support approximately 19.4GW of renewables, including 10GW of PV, by 2025.
Last year, Spain deployed around 2.6GW of additional PV, most of which was from projects backed by power purchase agreements, taking its total installed capacity to 13.2GW. According to new data from think tank Ember, the country generated 16% of its electricity in June and July 2021 from solar.
Spain is also aiming to reach 20GW of installed energy storage capacity by 2030 and 30GW by 2050 as part of a new strategy unveiled in February that includes policies to remove administrative barriers to facilitate new projects.
Despite being permitted in the auction earlier this year, energy storage bids didn’t feature, potentially due to the lack of a dedicated remuneration scheme as well as a short timeframe for participants to submit bids.
After the publication of the storage strategy in February 2021, the sector was expecting a mechanism to incentivise the installation of battery storage associated with renewables, said Lauritano, adding: “This could have been easily achieved with an additional reserved capacity threshold for renewable + storage. However, we will probably have to wait for a different mechanism for storage colocation or, possibly, for the next edition of the renewable auction.”