this year . In addition , bearish risks from additional renewables capacity “ far outweigh ” those that threaten an upturn in prices , say experts .
Spot prices have already fallen from EUR 52.31 / MWh in 2017 , to EUR 47.70 / MWh in 2019 , and EUR 32.75 / MWh so far in 2020 . The increase in renewables , loss of demand and low spot prices have seen captured prices – historic realised prices – for wind fall from EUR 53 / MWh in 2018 to EUR 31 / MWh over the past year , according to figures from Qwatt , a provider of PPA data . Those for solar have fallen from EUR 59 / MWh to EUR 32.50 / MWh in the same time frame , Qwatt estimates .
At the time of writing , the Spanish Cal 2021 contract was trading at EUR 43 / MWh , the same as in 2017 . By comparison 10-year baseload PPAs ranged between EUR 35-40 / MWh but may drop to EUR 30-35 / MWh in the period 2025-2030 , depending on the pace of installed capacity tied to the government tenders , experts say . This implies that about 14 GW of projects could be tied to economically viable PPAs until 2030 , with capacity auctioned by the government totalling 18.5 GW , according to Aurora . But should additional capacity growth exceed 32 GW , prices could crash , some experts warn .
Spain has granted around 120 GW of grid access to renewables , according to TSO Red Electrica . At least 10 GW is mature enough to meet the conditions and timing of the government tenders , says Javier Revuelta , principal at Afry Management Consulting . The most competitive bids in the 2020 tender could be below EUR 20 / MWh for solar capacity and EUR 25 / MWh for wind capacity , according Aurora . The current operating cost of new solar installations , which in many cases are below EUR 20 / MWh , could lead to an average awarded price in the tender of around EUR 25 / MWh , according to estimates from multiple sources .
Furthermore , a government annulment of a 7 % generation tax – which many market participants expect to happen by 2023 – could slash another EUR 2-8 / MWh from power prices , further damaging the profitability of merchant projects . “ It is undeniable that [ the government ’ s green tender plan ] will damage the PPA market , but we believe that there will continue to be business especially for corporate consumers who want to cut their carbon footprint ,” says an anonymous source from an European renewable producer active in the Spanish PPA market . In effect the Spanish government will be a competing offtaker in the PPA market .
However , PPAs could receive a boost if the government goes ahead with a proposed plan to underwrite them for large power consumers . “ If the state backs them , then many PPAs will be signed ,” says Dario Castagnoli , Nexus Energia ’ s operations director , pointing to greater flexibility in the duration of contracts . Banks are already beginning to accept shorter PPAs , between five and seven years , Castagnoli adds . At the end , they will be able to “ remain profitable .” n
Montel Magazine 4 – 2020