Spain Announces Tender for 3 GW of Renewables

Renewable Energy

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Spain’s government has announced it will launch a technology neutral auction for 3 GW of renewable energy capacity at the start of this year. The announcement came from energy minister Alvaro Nadal on Dec. 14 as he spoke to the nation’s parliament.

Nadal stated that the 3 GW auction is necessary to assure Spain of meeting its binding European Union target for 2020 stipulating that 20 percent of final energy consumption be sourced from renewable energy. Presently, the figure is a little over 17 percent.

However, with an absence of details over how the auction might overcome problems experienced with Spain’s previous auction in January 2016 and how it will introduce technology neutrality into the new auction, the announcement has left the industry somewhat bemused.

Reacting to the announcement, CEO of the Spanish Wind Energy Association (AEE), Juan Virgilio Márquez, told Renewable Energy World: “We still don’t know the details of the auction, so it is hard to build an opinion on it. The sector wants the paralysis that we have suffered for the last three years to come to an end, but within a well-designed system.”

At first glance, Spain hosts a buoyant renewable energy landscape, with a renewable share in its electricity generating mix close to 50 percent.

However, in recent years poor legislation and mixed signals from government have contributed to stagnancy in development .

Indeed, the AEE report that 2016 represents the second consecutive year with no new wind capacity installed in Spain. Meanwhile, though the renewable energy auction of January 2016 saw contracts for 500 MW of wind power awarded, to the dismay of developers, all went with zero premiums over market prices.

Commenting on the auction’s outcomes, Márquez said: “We believe that the outcome did not reflect the reality of the sector. The fact that the auction was isolated no calendar for further calls, and small-sized (only 500 MW), in a context where the sector had been paralyzed for several years due to the green moratorium caused an unexpected result.”

David Robinson, Senior Research Fellow at Oxford Institute for Energy Studies, provided further perspective on the forthcoming auction to Renewable Energy World. Robinson said: “Investors are hoping not to repeat the outcome of the last renewables auction in Spain: a zero premium above the revenue to be earned in the energy market.”

He added that “they expect the premium to be positive because the quantity to be auctioned this time is much greater and because last time, there were a number of projects with sunk investments which had an incentive to bid very aggressively. This auction will also have stricter guarantees to ensure that the bidders deliver the projects which are selected.”

On the other hand, Robinson noted that comparing the prices from recent PV and wind auctions in Latin America, Africa and the Middle East with Spanish wholesale energy market prices, premium resulting from the auction may not be very high.

“One cannot rule out a repeat of the last auction,” he said.