how it works and what it means that not even 1.5% has been awarded

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The last renewable auction has been a real disaster. Of the 3,300 MW of wind and solar energy, only 45.5 MW have been awarded, as described by the resolution of the Ministry for Ecological Transition. This represents less than 1.5% offered, which is a very low result compared to what was expected. What has happened? Does this mean that in Spain nobody has opted for renewables for the coming years? Not so fast.

None of the large energy companies has attended. The only two companies that have bought energy in this auction have been Elawan and Nearco Renovables. And both have opted for terrestrial wind energy. 20 MW for the first and 25.5 MW for the second. The rest of the energy companies have chosen not to attend, leaving the market practically up in the air.

Naturgy and Iberdrola appeared in the process, but they have not taken anything. Nor did Endesa, Acciona or Repsol attend. The energy sector is experiencing moments of tension and the result is that all these companies have bid above the price set by the ministry: 45.12 euros per megawatt hour. Elawan has paid €39.88/MWh for wind power, while Nearco has been around €45/MWh.

How these auctions work. Since 2013, Spain has had a public system to encourage investment in renewable energy. It is what is known as auctions and it is an act where the government puts installed power up for sale. Here the Ministry for the Ecological Transition (previously known as the Ministry of Energy) determines how much power it is feasible to subsidize and award.

Each bidder offers a price without knowing the price of the others. That price is a deal. The energy companies agree to invest in the MW awarded in exchange for the Government paying them that price in €/MWh. However, this price does not only correspond to supply and demand, since the Government establishes a reference framework.

The accounts do not balance with €45/MWh. The Ministry has set a ceiling of €45/MWh because it has considered that any price above this would harm the consumer. The fact is that practically all companies have considered that this number is very low and it is not profitable for them to commit. And it is necessary to take into account that this agreed price is the one that they will charge for what their plants generate for a long time, 12 years in the case of wind and photovoltaic.

“Clean energy will no longer be so cheap,” sources in the sector point out to Five days. The economic situation takes its toll and the cost of installing wind or solar energy has risen a lot due to general inflation. Large companies have chosen not to commit to prices that could be lower than what it would cost them.

How the electricity market works and why, despite the fact that the price sometimes reaches zero, it will barely affect our bill

Nothing to do with 2021. It was the fourth renewable energy auction within the REER. In 2021, for photovoltaic and wind power, about 3,000 MW were awarded each. As we can see, the last auction has been a disaster. Even worse than the previous one, which took place in October, where only 177 MW were awarded, out of a total of 520 MW.

The investment of 2,900 million euros will have to wait. The Government has promised to install 60 GW of renewable power before 2030. But with auctions like this week it will be difficult. The award of the 3,300 MW would have meant an investment of 2,900 million euros in renewable energy, but the low price has not attracted any major energy company.

Hoping the next one goes better. As a result of the results, Minister Teresa Ribera asked for “quiet” and anticipates that “there will be more auctions and in them it is certain that there will be a greater participation”.

The auction system is designed for the long term (at least a decade), so there is still room for all this renewable energy to end up being installed. Either the prices offered change or the economic situation changes. And it is not clear that this will happen.

Image | bastian pudill

The last renewable auction has been a real disaster. Of the 3,300 MW of wind and solar energy, only 45.5…

The last renewable auction has been a real disaster. Of the 3,300 MW of wind and solar energy, only 45.5…

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