Spain’s Ministry for the Ecological Transition and the Demographic Challenge (METDC) recently wrapped up the bidding for renewable energy power generation projects in 2022 with bleak results.
The bidding included 3.3 GW of renewable energy, among them 1.8 GW are set for solar and 1.5 GW are for onshore wind power, which ended with no deal completed for solar and only 46 MW assigned for wind. The successful bidder for wind power project involves two energy enterprises, with the weighted average price of about €0.043/kWh. The highest price is about € 0.045/kWh, and the lowest is about € 0.04/kWh.
This is the fourth time that the Spanish government has organized large-scale renewable energy project bidding. The success rate of the first three tenders has both reached 100%. The Spanish Renewable Energy Association and local media called it “the most frustrated bidding”.
However, renewable energy projects are still favored by the Spanish capital market, and a large number of energy companies have participated in the bidding this time, whilst the ideal prices set by the government was too low to be accepted.
Usually, the government will set a price ceiling for the bidding of renewable energy power generation projects as the ideal price, which is known as an “open secret”, but the industry has no access to specific value and details. The energy companies participating in the bidding can only speculate the price ceiling according to the market development trend and the supply and demand of raw materials and products, and bid accordingly.
The Spanish Wind Energy Association (AEE), according to the bidding results, assumed the price ceiling for renewable energy power generation project should be at €0.047/kWh, which is lower than the cost of most wind power project.
In January 2021, the bid price of renewable energy power generation projects in Spain has reached to the bottom at € 0.02/kWh. Apart from serious inflation and high transport costs, enterprises also need to face significantly increased cost on renewable energy products in the case of unbalanced supply and demand of raw material prices.
Giles Dickson, head of WindEurope (previous “European Wind Energy Association”) said that, “The price ceiling currently set does not reflect the actual trend of the market, but also becomes a defect in the bidding of renewable energy power generation projects in Spain. The price mechanism is not applicable to the bidding in Spain, neither noting the high cost of renewable energy power generation projects today, nor taking into account the development prospects of renewable energy power.”
The electricity prices in the country have been climbing since this year. Earlier, José Donoso, head of Spanish Solar Photovoltaic Association (UNEF), has foreseen such hindrance for renewable energy power generation projects. “Since the spot price of electricity market remains high, large renewable energy power plants are no longer so attractive to enterprises, and the bid price may change significantly,” said Donoso.
According to the current plan, the installed scale of wind power in Spain will reach 40 GW by 2025 and 50 GW by 2030. Meanwhile, the Spanish government hopes to promote the solar installation to 10 GW by 2025 through bidding. The dismal end of this year’s bidding has seriously hit Spain in achieving these goals.
“In order to make up for this tender, the Spanish government must ensure the success of the next tender, which requires changing the current price mechanism. In addition, this bleak result also warned other European countries. High electricity prices and rising renewable energy power generation costs not only happened in Spain, but also in Germany and other countries,” said Dickson.
