Spain approves new renewable energy auction regime with 5 GW/yr target

Spain's government has approved a new pay-as-bid renewable auction regime, which it will use to meet an annual installation target of 5 GW over the next ten years, it announced in the BOE state gazette Nov. 4.

The new regime is to be based on either installed capacity, energy produced or a combination of the two, with the bidding variable expressed in euros per megawatt hour (Eur/MWh).

The pay-as-bid model allows for bids from hybrid solar/storage projects, standalone storage and repowering of existing assets, as well as across the range of different renewable technology types.

Awarded support would be guaranteed for 20 years.

The energy generated would be fed into the daily and intraday markets, but receive the price awarded in the auctions.

A Contract for Difference-style mechanism ensures operators refund any surplus they might gain from market prices that exceed guaranteed prices, or receive sliding premiums funded by consumers if market prices are lower than guaranteed prices.

Offers may be subject to further incentives of up to an extra 50% on awarded price to supply during peak hours and subsequently drive out more expensive technologies from the offer side.

This should encourage flexible, dispatchable technologies, notably storage.

The awarded capacity would also retain the right to participate in balancing markets, and be fully remunerated from those markets, the BOE said.

The calendar and other auction details are yet to be determined, though the Ecological Transition ministry is aiming for a first sale to be held before the end of the year.

An auction calendar and further details are due in the coming days, to be valid for five years.

Each closed envelope auction will establish a maximum quantity of either output or capacity to be offered, with the lowest offers being matched until a quota is filled.

A number of other factors would be considered such as technical characteristics, level of dispatch control, location, technology maturity and innovation, the government said in a statement.

The new system "responds to the need to offer a stable framework which will attract investment and drive economic activity down the value chain of renewables . . . while ensuring that consumers benefit directly from the lower generation costs of these technologies," it said.

Spain previously carried out three centralized auctions in 2016 and 2017 which led to the installation of 2.8 GW of new wind capacity and 4.2 GW of new PV capacity during 2018 and 2019.

Since then, the market has been dominated by merchant additions, many of them funded by power purchase agreements.

In 2020 to date this has led to 0.8 GW of new wind and 1.3 GW of new PV capacity, short of the 5 GW per year target required to meet 2030 obligations.

New targets for 2030 are for the addition of a further 60 GW of renewable capacity as the country looks to phase out its coal plants through to 2025 and nuclear plants in the following decade while decarbonizing its industry.