Lessons learned from the solar auctions in Portugal applied to the case of Spain

FuturENERGY September-October 2020

The outcome of the solar auction in Portugal was announced last 25 August, which included two categories: PV without storage and any solar technology with storage. In this innovative second category, the storage requirements were at least 20% of the total capacity with a duration of 1 hour at rated output. The success of the results, awarding 670 MW of the 700 MW that were tendered at record low prices, indicates a strong interest in renewables; in other words, that investors are seeking renewable energies with remunerative stability.

The new category has added a new form of remuneration to that existing in 2019. In other words, in 2020 bidders could apply for a fixed price throughout the regulatory lifespan (Prémio Variável por Diferenças), pay a fixed price in order to be able to connect and receive the electricity wholesale price (Compensação Fixa ao SEN); or alternatively, the new form of remuneration (Prémio Fixo por Flexibilidade), under which the installation receives a fixed amount per year and the energy it generates is sold to the market, setting a limit above which a returns system is put into place.

As Figure 1 shows, the installation receives the wholesale price (on the right-hand chart, the green line) up to the point at which the wholesale price exceeds the limit (strike price). When this option is activated, the installation must return 90% of the difference between the wholesale price and the strike price. The example on the left of Figure 1 illustrates the following case: if the wholesale price is 90 €/MWh and the strike price is 60 €/MWh, for an output of 100 MW with 20 MW of batteries, during one hour, the developer is paid 20 MWh x 90 €/MWh = 1,800 €; However, during that hour it must return 90% of 100 MWh (90 €/MWh – 60 €/MWh) = 2,700 €; in other words, a net return of 900 €. This strike price was predetermined in the auction conditions as well as specific projections from the Portuguese government, as advised by the consultancy firm ÅF Pöyry AB (AFRY).

By Gonzalo Martín. General Secretary of Protermosolar