On January 26th, 2021, the Spanish government published the results of the first auction under the Renewable Energy Economic Regime (REER) set forth in Royal Decree 960/2020 (RD 960/2020). This round of auctions is the first in the 2020-2025 period. In total, the auctions will award almost 20 gigawatts (GWs) of new power plants (including hybrid power plants), as well as the expansion and repower of existing assets compatible with storage.
What Were the Results of the Auction?
3,034 megawatts (MW) of renewable energy capacity was awarded. The total capacity was split between 2,036 MW of solar photovoltaic (PV) capacity and 998 MW of wind capacity. A total of 84 renewable energy developers participated in the auction, of which 28 were awarded contracts.
The winning bids of the pay-as-bid auction were listed as follows. (Note that in addition to the awarded price for the negotiated energy [both on day-ahead and intraday markets], non-dispatchable projects are also able to get further market incentives of an extra 5%-to-25%, and additional incomes from energy trading closer to real-time, such as those from the ancillary services provided. As such, the prices below are not an even comparison to what a buyer may expect from a traditional, fixed-price power purchase agreement [PPA]).
- Highest winning bid: 28.9 €/MWh
- Lowest winning bid: 14.89 €/MWh
- Awarded weighted average solar bid: 24.47 €/MWh
- Highest winning bid: 28.89 €/MWh
- Lowest winning bid: 20.00 €/MWh
- Awarded weighted average wind bid: 25.31 €/MWh
What Does This Mean for the Spanish Renewables Market?
Despite the auctions, there is still a strong pipeline of projects in the Spanish market available for corporate offtake. The auction results also reinforce the growth and competitiveness of the Spanish renewables market in general and show how solar and wind will play a key role in the country meeting its target of 74% of electricity from renewable sources by 2030.
Schneider Electric’s State of the European Renewable Energy Market 2020 H1 and H2 reports analyze data from over 1,500 renewable energy projects across Europe.
Since the solar and wind projects awarded in the auction don’t need to reach Commercial Operation Dates (CODs) until February 2023 and February 2024, respectively, the short-to-medium term impact of this first auction on wholesale market prices will likely be minor. The long-term impact on prices will be further influenced by a future round of auctions, among other factors.
How Should Corporate Buyers Proceed?
The increased influx of renewable capacity onto the Spanish electricity grid over the coming years will increase the importance of risk management in renewable energy contracts, including corporate PPAs. The final auction results also signal further competitiveness of corporate PPA prices in Spain.
Schneider Electric’s Energy & Sustainability Services team is the largest advisor on corporate renewable energy purchasing in the world, with local Spanish market experts to counsel you on the right strategy.