We are pleased to present our latest Portuguese solar auctions 2020 commentary on the upcoming auction for solar and storage systems.
Highlights of our key thoughts include:
- Compared to the 2019 auction, a new flexibility option will be included to provide capacity payments (€/MW/year) to solar plus storage while providing an insurance against price spikes to the system through a one-way CfD
- In the 2019 auction, 75% of allocated capacities opted for the guaranteed remuneration scheme. Considering the current uncertainty from COVID 19, this scheme is likely to remain a preferred option in this year’s auction
- We expect similar levels of competitiveness in this auction compared to last year. This is driven by what we expect will be a highly subscribed process and, as it relates to the fixed price modality, the strong appetite for revenue certainty in the current market price environment
- The modality for solar plus storage is unlikely to be able to compete with the other remuneration options due to:
- high CAPEX costs for storage systems
- low benefits for reducing solar price cannibalisation in the short term as solar capacities remain low
- high competitiveness to capture price spreads due to the existing fleet of pumped hydro
- Under our Central forecast, deployment of subsidised renewables is expected alongside merchant/quasi merchant projects depending on the risk-return preference of developers. As such, we do not envisage the outcomes of the auction to affect our previous capacity and price projections
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