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The economic regime for renewables in Spain – November 2020

We are pleased to present our research note on the new economic regime for renewable energy in Spain.

Key insights from the analysis include:

  • On the 6th of November, the Spanish Government unveiled its intention to auction 19 GW of renewables over the next 5 years. The aim is to hold an initial auction in 2020 for 1 GW of solar PV and 1 GW of onshore wind
  • Aurora Central expects further scope for over 14 GW of merchant buildout alongside the announced auctioned capacities until 2030. However, if the advent of auctions accelerated merchant development, capture prices could decrease by over 10% over the next decade
  • Although the auction is meant to provide visibility on revenues to generators, contract holders could still be exposed to price uncertainty through a price adjustment mechanism. This uncertainty is expected to translate into a premium of up to 2-3% to bid prices for solar PV and onshore wind
  • The most competitive bids in the 2020 auction could come in at under 20€/MWh for solar PV and 25 €/MWh for onshore wind. The key factors that will drive the auction clearing prices are level of competition, cost of capital and risk appetite, post-contract revenue expectations and plant-specific characteristics. Aggressive bidding strategies could lead to even lower prices
  • Despite the availability of long-term contracts through the auction, merchant renewables could continue to provide an attractive option for less risk-averse developers, resulting in higher rates of return

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