Portugal’s decision for public auction procurement process for PV plants has been met with spectacular demand.
The Portuguese government plans to tender for 1.4 GW of solar generation capacity. With the auctions in question due to be completed by August 10, minister of the environment and energy transition João Pedro Matos Fernandes has announced a ceiling price for the tender will be set at €45/MWh (€0.045/kWh).
Fernandes told the Sapo financial newspaper the 24-project PV tender prompted applications for 10 GW of capacity from 64 projects. The minister added, he was fully aware the current average price for solar on the Iberian peninsula is around €55/MWh.
“Regarding the subscription of 10 GW for 1.4 GW of connection points available, it seems to me the market is looking into Portugal as a competitive and transparent market with fair and well planned bidding processes,” Pedro Amaral Jorge, CEO of Portuguese renewable energy association APREN told pv magazine. “Having said that, for sure Portugal gathers all the required and necessary conditions to be a top European market for PV generation, both centralized and distributed.”
Fierce price competition
State secretary for energy João Galamba revealed, of the 1.4 GW of capacity to be auctioned, 750 MW will be assigned to projects in central-northern Portugal’s Centro region and another 340 MW will be assigned to the Lisboa e Vale do Tejo region, in the center of the country. Alentejo and Algarve, sunnier regions further south, will be allocated only 235 MW and 30 MW, respectively.
Jorge agreed with Minister Fernandes’ prediction such high demand for the tender would drive prices even further below the ceiling price.
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To put that restrictive €45 price ceiling into a southern European context, Greece recently allocated 143 MW of new solar generation capacity for €62/MWh. The Iberian peninsula, however, has attracted subsidy free solar projects in recent months at power prices as low as €27/MWh.
Developers in the Portuguese tender can present two kinds of offer: one with a fixed price below €45/MWh and another with a variable tariff which includes a requirement to pay compensation to the electricity system, depending on the spot market power prices. When the project price is higher than the market price, the Portuguese government will pay the project the difference between the prices. When the market price is higher, the project owner will pay the Portuguese government the difference.
Successful projects will be granted a 15-year power supply deal.
Minister Fernandes said the current subscription level suggests around €1 billion will be drawn into the country’s renewable energy sector as the government plans to install 7 GW of solar by 2030.
Portugal has installed 700 MW of solar capacity, mainly on residential and commercial rooftop, to date. By 2020 the country wants to have 1.5 GW installed, looking at the development of large-scale solar parks.
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Germany has eight times the population of Portugal. Its last solar auction was only for 500 MW, and the price was 6.5 cents/kwh. Thinking big pays off; thinking small gets what it deserves.