How does it work and what does it mean that even 1.5% is not awarded

The last renewable auction was a real disaster. Of the 3,300 megawatts of wind and solar capacity, only 45.5 megawatts has been awarded, as described by Decision of the Ministry of Environmental Transformation. This is less than 1.5% offered, which is a very low result compared to what was expected. what happened? Does this mean that no one in Spain has chosen renewable energy sources for the coming years? Not so fast.

None of the big energy companies attended. The only two companies that bought energy at this auction were Elawan and Nearco Renovables. Both chose terrestrial wind energy. 20 megawatts for the first and 25.5 megawatts for the second. The rest of the energy companies chose not to attend, leaving the market practically up in the air.

Naturgy and Iberdrola featured in the process, but they didn’t take anything away. Nor did Endesa, Acciona or Repsol attend. The energy sector is going through moments of tension, and the result is that all of these companies submitted bids higher than the price set by the ministry: 45.12 euros per MWh. Elawan paid €39.88/MWh for wind energy, while Nirco was about €45/MWh.

How do these auctions work? Since 2013, Spain has a public system to encourage investment in renewable energy. It’s what’s known as auctions and it’s a business where the government puts proven energy up for sale. Here the Department of Environmental Transition (formerly the Department of Energy) determines how much energy can be subsidized and granted.

Each bidder offers a price without knowing the price of others. This price is a bargain. Energy companies agree to invest in the granted megawatts in exchange for the government paying them this price in EUR/MWh. However, this price is not only in line with supply and demand, as the government sets a frame of reference.

The accounts do not balance with 45 euros / MWh. The ministry set a ceiling of 45 euros/MWh because it considered that any price higher than that would harm the consumer. The fact is that almost all companies have considered this number to be too low and it is not profitable for them to stick to it. It is necessary to take into account that this agreed price is the price they will charge for what their factories generate for a long time, 12 years in the case of wind and photovoltaic.

Sources in the sector indicate that “clean energy will no longer be cheap” five days. The economic situation is taking its toll and the cost of installing wind or solar power has gone up a lot due to general inflation. Large companies have chosen not to commit to prices that may be lower than they would cost.

It has nothing to do with 2021. This was the fourth auction for renewable energy within rar. In 2021, about 3,000 MW has been awarded for both photovoltaic and wind power. As we can see, the last auction was a disaster. Worse than the previous one, which happened in October, when only 177 megawatts were awarded, out of a total of 520 megawatts.

An investment of 2,900 million euros will have to wait. The government has promised to install 60 gigawatts of renewable energy before 2030. But with auctions like this week, it’s going to be tough. Granting 3,300 megawatts would mean an investment of 2,900 million euros in renewable energy, but the low price has not attracted any major energy company.

Hopefully the next one will go better. As a result of the results, Minister Teresa Ribera request “quiet” He expects that “there will be more auctions and there will certainly be more participation.”

The auction system is designed for the long term (at least a decade), so there is still room for all that renewable energy to eventually be installed. Either the offered prices change or the economic situation changes. It is not clear if this will happen.

Image | Bastian Bodel