We are pleased to present our latest Iberian power market forecast, April 2020. This annual update presents our comprehensive view on the state of the Spanish and Portuguese power markets, and includes our latest outlook on prices, production, capacity, and asset performance to 2050. This report marks the first forecast where we extend our outlook horizon until 2050.
The analysis draws upon our internal modelling capabilities, and much of the content has been developed through a detailed consultation process across private and public sector players.
Key highlights in this quarter’s update include:
- In this quarter, we extend our forecast horizon until 2050, which sees both Spain’s and Portugal’s power sector carbon intensity reaching 30 to 50 gCO2/kWh
- Our Central baseload price is forecasted to rise from 31€/MWh in 2020 to 54€/MWh in 2025, and 58€/MWh in the 2030s. The trend reverses beyond this point, with baseload prices declining to 53€/MWh in 2050
- Relative to our Jan 2020 update, average annual baseload prices have fallen by 2.7€/MWh until 2040 due to a downward revision to commodity prices. The impact is most significant until 2025 due to the impact of COVID-19 on commodity prices and demand
- The growth of wind and solar capacities will accelerate to reach 114 GW in Spain and 28 GW in Portugal respectively by 2050. While this exacerbates price cannibalisation (discounts of solar and wind capture prices to the baseload price are 40% and 20% in 2050), merchant-based renewables are still economically viable
- As part of the EU’s Green Deal announced last year, Member States have set forth a proposal for achieving the ambitious Net Zero target by 2050. Key changes would include increasing the 2030 emission reduction target of 40% from 1990 levels to between 50 – 55%. This is expected to lead to a rise in the price of EUAs
- The Spanish Government is looking to reform the current renewables subsidy regime. This will likely see a move from the current capacity-based compensation scheme towards a generation-based scheme, similar to that of Portugal
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The next quarterly update of this report will be distributed in July 2020.