Portugal’s Record Bid of €0.01470/kWh is not the Price of PV

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  • Antonio Delgado Rigal, chief executive of energy forecasting service Aleasoft, says the lowest final price of €0.0147/kWh announced by the Portuguese government from its recent solar auction does not reflect the real costs of PV and is no indicator of the future price of power in the electric market.
  • More details of the auction are emerging and Iberdrola and Akuo appear big winners.

On Tuesday the Portuguese government announced an astonishing low bid of €0.0147/kWh for solar electricity had secured generation capacity in the country’s first solar auction, with €0.020/kWh the average bid received in the procurement.

However, Antonio Delgado Rigal – chief executive of Spanish energy forecasting service AleaSoft – said the ‘record price’ of €0.0147 does not reflect the price of PV power.

He told pv magazine that price would be unprofitable for a solar project anywhere in the world. “This price does not exist in the market and it is not even an indicator of the future price of power in the electric market,” he said. “This is a price coming from a complex auction of which we still don’t know all of the details.

“Nobody can build a solar park and offer this price. Although we can only speculate now, as the details of the auction are not known yet, I can say that the price of €0.01470/kWh can be a deterrent as it may prevent new entrants from joining the solar race in Portugal, ” he also affirmed. “I do not intend to cast a shadow on the auction, which was absolutely transparent.”

“We are not questioning the auction’s results, I want to be clear on this.” he added. “The auction, however, may include some conditions that we don’t know yet, which may have made such an offer possible.”

Delgado said the bidder behind the offer may have sufficient financial resources to ensure it does not need third-party financing for the project. “This could have some counterpart in some sense, from the point of view of securing market shares, for example,” said the Aleasoft chief exec.

Possible negative impact

Delgado believes the latest world record low price – if confirmed and the bid is accepted – may have negative consequences for the burgeoning private power purchase agreement (PPA) market on the Iberian peninsula.

“These prices are a disincentive for several investors which expect much higher prices for bilateral PPAs linked to solar parks,” said Delgado. “These prices are apparently good news because this is clean energy, but are negative for investors, developers and new market entrants. Of course, intensive energy companies after this auction will require to buy power at around €0.020/kWh and PPAs at €0.040/kWh will become more difficult to secure.” The Aleasoft chief said all the PPAs recently signed in Spain were at a price well above €0.030/kWh. “The auction’s result, however, should not raise false expectations – you can’t buy a gold Rolex at €100,” he said.

Electricity prices are on the rise, said the chief executive, and may increase further. On the Scandinavian Nord Pool electricity market, prices are at an historic high. A year ago, buying on the market was cheap. In Spain too, prices keep rising because of an increase in the price of CO2 emissions.

More auction details

Portuguese financial newspaper Dinheiro vivo has revealed more details of the auction’s results. It reported around 1.15 GW of solar generation capacity was allocated – short of the planned 1.4 GW. Of the assigned capacity, the newspaper reported, 862 MW were for projects with a fixed tariff while the remaining 288 MW went to projects bidding a variable tariff.

The article added, Spanish energy company Iberdrola and French independent power producer Akuo Energy were the auction’s biggest winners, the latter with the largest amount of assigned capacity, at 370 MW, and with the Spanish utility securing the most projects – seven of the 22 allocated. The article also reported Portuguese energy companies including EDP and Galp were among the bidders to fail to secure any generation capacity.

Author: Emiliano Bellini

This article was originally published in pv magazine and is republished with permission.

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