December 4, 2020

The Government approves the decree to launch renewable energy auctions



Green light for the expected auction decree for new renewable capacity. The Council of Ministers approved this Tuesday, at the proposal of the Ministry for the Ecological Transition and the Demographic Challenge, the Royal Decree that regulates the new economic regime of renewable energies for electricity generation facilities, as indicated by the Minister of Finance and Spokesperson for the Executive, María Jesús Montero.

The objective of these auctions, the first edition of which is scheduled between now and the end of the year, is to allow the massive deployment of these sources, taking advantage of their potential in economic reactivation and transferring to all consumers the savings that they already allow thanks to the spectacular decrease in costs of technologies such as photovoltaics.

The decree has been approved together with the Long-Term Decarbonization Strategy, which sets the path to achieve climate neutrality by 2050, and enables an auction system based on the principles of transparency, effectiveness, proportionality, objectivity and efficiency, to that the promoters can bid by offering the price they are willing to charge for the energy generated by their plants under a new remuneration framework called the Economic Renewable Energy Regime (REER).

It is, according to Montero, a stable, “predictable” framework for future installations at a time when these can serve as a lever for recovery, offering “efficient economic signals” that transmit clear signals to investors.

The objective is for the first auction to be held “before the end of the year”, according to the fourth vice president, Teresa Ribera, who believes that Spain can “lead” the “industrial and technological revolution” of renewables. The decree takes advantage of the experience of auctions held in other countries such as Portugal, Germany or Italy and departs from the model that the Government of Mariano Rajoy tried in 2016 and 2017, which derived on several failed projects whose endorsements are now running and that the sector criticized for its complexity.

With the system approved this Tuesday, before the celebration of each auction, a quota of energy and / or maximum power to be awarded will be established. The auctions will be held in a sealed envelope and the auctioned product will be awarded to the cheapest offers until the established quota is reached. The price for each successful bidder will coincide with the price for which they bid (“pay-as bid”, for its name in English) and will not be updated.

The standard regulates the financial guarantee that the facilities must present, although the amount of the guarantees to be deposited will be specified in the order that regulates the auction procedure. The decree will make it possible to distinguish between technologies based on their technical characteristics, manageability, geographic location or technological maturity, among other factors. It will also allow to hybridize technologies, expand and modify existing facilities, as well as storage.

The auctions will be called by ministerial orders that will regulate the mechanism of each call and may include, among other aspects, the technologies, conditions and guarantees to participate, the product to be auctioned, and the rest of the REER specifications. Also by ministerial order, a forecast will be collected with the celebration calendar, which will have a minimum period of five years and indicative terms for the frequency of the auctions, expected capacity and planned technologies, if applicable. This calendar will be updated at least annually and will be aimed at achieving the renewable production targets set by the Integrated National Energy and Climate Plan (PNIEC) 2021-2030.

The Royal Decree project allows criteria to be established in each auction so that certain projects with specific characteristics (small, demonstration, energy communities …) can “compete on equal terms” and enable a process of adherence to the auction result, with an award price calculated from the results, for small installations and demonstration projects.

In the order regulating the auction mechanism, “intermediate control milestones may be established to verify compliance with the energy generation commitment assumed by the facilities awarded the auction.”

The REER beneficiary facilities will participate in the daily and intraday electricity market. They will receive, for the energy sold in those markets, the price set in the auction, “corrected, where appropriate, by the applicable market exposure, up to a determined volume of energy and for a maximum established term”. The order may adapt the remuneration mechanism for its application in storage facilities.

Alternatively, it can be established that the price resulting from the auction is corrected with incentives for the successful bidder to participate in the market, introducing certain exposure of the facilities to the electricity market. With this, “it can be encouraged, for example, to offer its energy in the most expensive hours of the market, which allows it to displace other forms of generation with higher prices,” explains the ministry.

With this measure, it is also possible to favor the installation of plants capable of moving their production at certain times, such as those with storage. Where appropriate, this percentage of correction on the price set in the auction will be defined in each call, with a value that will always be between 0 and 0.5.

Lastly, the winning facilities may participate in the adjustment and balance services, where they will charge the market price of said services.

For its part, the route established in the Long-Term Decarbonization Strategy (ELP 2050) approved this Tuesday will allow reducing greenhouse gas (GHG) emissions by 90% by 2050 compared to 1990. The remaining 10% will be absorbed by carbon sinks.

The auction decree develops a Royal Decree-law approved in June, after lifting the State of Alarm, and “responds to the need to offer a stable framework that attracts investment and encourages economic activity throughout the country’s renewable energy value chain in a recovery scenario after the health crisis” According to the ministry, which recalls that the launch of this auction mechanism is “essential” to comply with the decarbonization commitments that Spain has acquired in the Paris Agreement and as a member state of the European Union.

These commitments are included in the PNIEC, which foresees the installation of around 60GW renewables in the next decade, with an investment of more than 90,000 million, and whose objectives for 2025 are expected to advance the Government’s Recovery Plan. The ministry recalls that renewable energies are key to achieving climate neutrality no later than 2050 and are the cheapest source: “Spain has great renewable potential, both in windy hours and in sunny hours, and a consolidated business fabric that has of mature technologies and others in very advanced stages of development “.

Thus, it is estimated that up to 90% of the components of the wind turbines, 60% of the photovoltaic projects or 80% of the thermosolar plants are of national manufacture, so the standard “will have a very positive impact on the supply chain. industrial value and national employment “.

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