PV Magazine España’s question of the month to Jorge Álvarez, Consultancy Manager of Enertis

Spain was the largest PPA market in Europe and will continue to be in 2021, with an average price of €35/MWh for solar PV, according to the Swiss consultancy Pexapark Do you think that the average price for solar PV reached in the auction of 24.47€/MWh will influence the PPA market in our country? And if so, when and how?

In my opinion, it should not have a significant influence. The prices resulting from this last auction were foreseeable for many of the offtakers and generators who have recently signed corporate PPAs in Spain, the majority of which above 35€/MWh. Therefore, if there was anything to discount (which I think there was not), then these results had already been discounted for some time.

However, it is true that these results give offtakers and generators a lot to think about. Now they will “sharpen their pencils” and try to figure out how some of the winning bidders attained these prices. Nonetheless, the only thing the auction prices tell us are the minimum prices at which winning bidders must sell energy in order to successfully execute their business plans. Each winning bidder’s project is different, and they all operate under unique market assumptions with different profitability and positioning requirements. Therefore, the winners were those that most competitively aligned these parameters in this extremely competitive environment. Finally, as often occurs in these types of auctions, some bidders might have even been too competitive.

Corporate offtakers are perfectly aware of the value to generators of having the Spanish state as counterparty in a PPA and are therefore very conscious of the subsequent quantitative leap in PPA reference prices versus what they could attain without the state as counterparty. Offtakers also know that it is not simply a matter of paying for the additional risk perceived by the generator’s shareholders but is oftentimes a go/no-go requirement to make the underlying project financially feasible.

Electricity pool price forecasts should have a much greater influence on PPA prices. Although it is not often the case, these forecasts should be the benchmarks and main concerns of offtakers and generators.

Interview published in PV Magazine