Renewable energy auctions in 2021
The Government approved Royal Decree No. 960/2020 at the beginning of November 2020, which regulates the economic system of renewable energies in energy production facilities. In three words: Renewable auction. At AEQ, we are first of all interested in the following aspects: the installation of renewable energy generation projects is progressing smoothly, and we have achieved the goal of reducing greenhouse gas emissions proposed by Europe, and we have transferred it to the Plan National Integrated Energy and Climate (PNIEC).
We also believe that if the market is understood as the purchasing power of this type of renewable energy and the initiative of investors to install new renewable energies, it is only possible to achieve the objective of installing renewable energies in the medium and long term. It is recommended not to introduce price regulation, insurance premiums or special remunerations for the industry. In the past, both investors in renewable energy projects and all consumers who owed fees and taxes on power generation had unstable regulations on the remuneration of renewable energy.
The investment recovery period is very long, different economic periods, different administrative management, continuous technological development and important changes in electricity prices can also occur. All these changes can put consumers, producers or public management in an extreme situation, so only when it is shown that the market cannot achieve the established objectives, the solution to regulate the income of renewable energy generation should be the last option.
However, the Government responsible for this policy has never demonstrated in the short and medium term that the electrical energy that is being put into service, built and plans to be installed with a high degree of safety to assess whether the market can meet the objectives renewable energy facility established on its own. As far as we are concerned, we only see numerous installations at startup, while large companies with high solubility (Spanish and foreign electricity companies, oil companies, long-standing renewable energy companies and investment funds) have announced billions of billions This information cannot be used to confirm that the installation of the renewable energy objectives established in the PNIEC is guaranteed, we can say that there are indications that this can be achieved.
We believe that the design of the renewable energy auctions seems correct, introducing novelty, that is, each winning project will be paid the price of the energy it provides, which means that not all projects have the same price. From the perspectives of installation cost, efficiency, technology, annual power generation, and shareholder enthusiasm in setting the rate of return on investment, the characteristics of each individual seem to indicate the possibility of a difference in electricity prices, that is, there is a difference between consumers. and difference in electricity prices. Auction costs will go down, and you should be able to take advantage of it.
Many participants in the electricity market agree that the auction settlement plan is not enough. We reserve our opinion on why we need to pursue this plan, but the auction facility's energy settlement is not for the actual energy produced, but rather for the energy sold in the market, which will create unfavorable incentives and cause the facility to arbitrate. between market prices. What deviations are resolved (the difference between the amount of electricity generated and the products sold in the market) and the auction price at which the energy sold in the market will be paid.
On the other hand, all the obligations of price and quantity of energy are assumed by consumers, and consumers must assume everything that the auction facility produces at a fixed price, without knowing how much energy there will be in each period. The quantitative risk has the value that is given to the generators. They have shown that they know how to manage risk, but consumers cannot. In the same way, once the auctioned renewable generators have exceeded the minimum power generation threshold, they are given a variable period to use the auction price or not to use the auction price. In other words, after keeping the project on a fixed income and exceeding the generation threshold, renewable energy facilities can choose to sell energy to others as long as they pay more.
Finally, it is wanted to point out that consumers who completed their long-term energy purchases (PPA) through physical energy settlement or financial settlement today will also be affected by energy prices and auctions. If it is physical delivery, part of your purchase plan will be settled at the auction price (in proportion to the auction price). If it is a financial settlement, they will use the settlement price of the PPA as the daily market price, and they must buy energy in the market and pay the daily market price and the auction price in proportion to this.