Portugal awards world’s lowest-cost solar PV contract

Portugal awards world’s lowest-cost solar PV contract

Portugal is now the country with the world’s lowest-cost solar PV contract. The lowest tariff awarded in the country’s first solar PV auction, held in July 2019, was just €14.76/MWh, or US$16.54/MWh. This narrowly beats the recent US$16.95/MWh contract awarded in Brazil.

Commenting, Tom Heggarty, Wood Mackenzie Senior Research Analyst, said, “With the levelised cost of utility-scale PV in Southern Europe now well below current wholesale power prices, investors have flocked to the region to try and secure grid connection capacity and PPAs. Portugal, like Spain, has seen a project development rush and new connection licenses for 938 MW of utility-scale solar PV projects were issued up until mid-2018.

“To manage the multi-gigawatt pipeline of projects queuing behind licensed sites, Portugal’s Direcção-Geral de Energia e Geologia took the decision to hold a series of auctions. In contrast to most other European auction programs, these would award both grid connection capacity and either guaranteed or general remuneration support to successful bidders. Under the latter of the two remuneration models, developers bid for grid connection rights and are then able to sell their output into the wholesale market or via bi-lateral PPAs. A total of 862 MW was awarded under guaranteed remuneration and 288 MW under the general remuneration arrangement.

“This July’s auction is, by a distance, the lowest-cost contract awarded through a public auction in Europe and gives a measure of solar PV‘s increasing economic competitiveness in the region.

“Out of a maximum allocation of 1.4 GW, the auction awarded 1.15 GW of capacity, with French developer Akuo Energy securing 370 MW, Akura Power Developments receiving 168 MW and Iberdrola winning 149 MW. These results in Portugal and recent outcomes in Brazil highlight the increasing challenge of comparing auction prices on a like-for-like basis. Soon-to-be-announced results from the second solar PV auction in Saudi Arabia could muddy the water even further.

“What is clear, however, is that in liberalised power markets, solar PV investors are ascribing ever more value to revenue streams outside of those secured through competitive auctions. Taking on merchant risk pre-, during or post-PPA is becoming the norm. This presents a range of new risks and opportunities.

“A second auction, for 0.7 GW, is planned for January 2020. Longer-term, the Portuguese government has grand ambitions for solar PV, targeting 8.1 – 9.9 GW of installed solar PV capacity by 2030, up from 689 MW as of the end of 2018.”

Source: energyglobal.com

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