Spain’s New Renewables Auctions Will Allow For Bids On Energy To Be Supplied Or Combined With Installed Power

The new system for auctions offers earnings' predictability and stability for investors in new renewable plants

Spain’s Cabinet has authorised the processing of the emergency decrees to regulate the procedure for auctions and access and connection to the energy transmission networks. These decrees will provide legal certainty for the Spanish energy framework, preparing it for the installation of some 60 GW of renewables in the next decade.

In the upcoming auctions for the construction of renewable plants, the product on offer for participants will be the energy to be supplied, the installed power or a combination of both. Bids will continue to include the price to be charged for the energy generated by the renewable facility. Up until now, the product auctioned has been the installed capacity, subject to a minimum and maximum in order to receive the return per operation.

This system offers earnings’ predictability and stability for investors in new renewable plants. At the same time, it allows for the direct transfer to consumers of the savings that a greater renewable generation implies. This is because it is the cheapest energy source at present, as the Energy Transition Ministry has said.

The auctions will also be specific to different subsectors, i.e. photovoltaic, wind power… so that investors will bid for specific sectors, in order for banks to provide them with financing. Factors such as technical characteristics, size, manageability levels, location criteria and technological maturity will be taken into account to hold the bids.

The new regulation also enables the government to use the piggy bank with around 1 billion euros generated by the surpluses accumulated in the electricity system. The objective is to guarantee the electricity firms’ liquidity in 2019 and 2020, when deficits are expected to occur. This year, the accounts will be negative due to the impact of Covid-19, with a 20% drop in electricity demand during the confinement.

In addition, new business models that the sector is already demanding, like storage, hybridization and the independent aggregator, are being incorporated into Spanish regulation.