On January 26, the first auction was held under the new renewables scheme (REER) in Spain. This research note summarises the key outcomes of this auction and provides a brief analysis on the impact of the results for the PPA market.
Highlights from the note include:
- The first REER auction has secured over 3 GW of capacity, with solar PV entirely dominating the technology-neutral volume
- A heavily oversubscribed process has led to clearing prices in the range of 14.9 to 28.9 €/MWh for solar PV, and 20 to 28.9 €/MWh for onshore wind, and a capacity-weighted average price of 24.5 and 25.3 €/MWh respectively, indicating a similar level of competitiveness between both technologies
- The effect of these clearing prices on the PPA market will depend on the expected demand/supply balance in the market. With the auction removing over 19 GW of renewable capacity from the PPA market, our projections suggest a fairly balanced market for the next decade as the increase in the supply-side is compensated by an increase in the demand for PPAs from corporates and utilities.
- With market prices expected to rise in the next few years mainly driven by higher commodity prices, we expect the “fair value” of a PPA to remain above the awarded price in the auction
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