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Outlook 2019: Shortfall in Spanish RES build in 2019 could cut 2020 spread

Highlights

Only 1.3 GW out of 4.7 GW RES projects are seen likely

Coal to be cut by 5 GW in Q2 2020, leaves the mix tighter

Spanish Cal 19/20 spread above YTD average

London — Spanish power prices for Cal 20 could see their spread with Cal 19 narrow as the amount of renewable projects expected to be completed come short of estimates as projects struggle to get funding.

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The Spanish Cal 19/20 spread year-to-day averages around Eur4.90/MWh, so that Cal 20 is at a significant discount due to the expected increase in renewable generation of around 4.7 GW.

S&P Global Platts Analytics sees 3.4 GW solar and 1.3 GW wind capacity added to the existing 23.2 GW of wind and 7 GW of solar.

However, only an approximate 1.3 GW have secured financing out of the renewable projects expected to be build in 2019 and look likely to be build on time, according to sources close to matter in Spanish utilities.

This has been observed throughout the year by several market players as the renewable projects have struggled to receive financing from the more traditional sources, as that of banks.

Projects have moved to other ways to receive financing as Power Purchasing Agreements. The number of PPAs have been heard to be rising in Spain in the latest months, which could help increase the amount of projects.

Long term finance of projects difficult due to backwardation seen in the curve, Cal 19 seen at Eur62.44/MWh compared with Eur55.80/Mwh in 2020 and Eur51/MWh 2021 according to December 20 OMIP data.

COAL TIGHTNESS IN 2020

Platts Analytics has also said that an estimated 5.22 GW of coal generation would occur in Q2 2020 as they expect a sharp drop instead of a gradual wind down of plants due to the Spanish high utilization of coal generation.

So that more than half of the current coal generation of 10 GW would cut leaving more dependane on gas-fired generation.

This would also see a more tight generation mix if the market ends up short on the renewable output expected. So that the Cal 19/20 would narrow from its latest spread at more than Eur6.64/MWh, above the year-to-date average.

--Mario Perez, mario.perez@spglobal.com

--Edited by Alisdair Bowles, newsdesk@spglobal.com