Stockholm (NordSIP) – As the popularity of renewable investments continues to grow among investors, the impact on the market continues to grow. In the latest such example, the Portuguese government announced its latest auction for floating solar panels (to be placed in dams across the country) had achieved the lowest energy price in the world. The negative price achieved for one of the lots means that one energy provider will actually pay the government for the privilege of producing the energy.
The auction sought to award different energy providers with the production of 183 megawatts (MW) for 15 years. Among the different lots awarded at the auction, one such allotment was priced at €-4.13/MWh, beating the previous lowest price record of €11.14/MWh registered by Saudi Arabia in 2020.
Paying for the Privilege
The total capacity made available in this first floating solar auction was 263 MVA (megavolt-ampere) in the Alqueva, Castelo de Bode, Cabril, Alto Rabagão, Paradela, Salamonde and Tabuaço reservoirs. Two Companies, EDP Renewables (EDPR) and Finerge were awarded contracts during this auction. EDPR was awarded the most capacity (total of 70 MW) in Alqueva, and was responsible for the new record price. Finerge was awarded another three lots.
“The grid connection capacity is expected to allow EDPR to install up to 154 MW of renewable capacity including 70 MW of floating solar PV under the mentioned contract for differences (CfD), plus 14 MW of solar overcapacity and 70 MW of hybrid wind capacity, both excluded from the CfD. The project is estimated to be operational in 2025,” EDPR said in a press release. Indeed, according to other reports, the negative price was motivated by potential cost synergies between solar and wind power as well as the integration of electricity storage.
The winners of the auction are also awarded the license for the “water plan” (where the floating solar panels are to be installed) for 30 years.
EDP Renovaveis is 73% owned by EDP – Energias de Portugal. EDP – Energias de Portugal is itself mainly owned by 8 investors: China Three Gorges Corporation (20.22%), BlackRock (10.01%), Oppidum Capital (7.20%), Canada Pension Plan Investment Board (5.16%), Amundi Asset Management (2.63%), Norges Bank (2.42%), Qatar Investment Authority (2.27%), Sonatrach (2.19%), among others. BlackRock owns another 3.38% separate stake in EDP Renováveis.
An Urgent Need
The issue is very relevant to the economic and energetic context of Portugal, where the electricity bill represents 6.3% of the median household income. Among EU member states, only in Bulgaria and Poland dies the electricity bill represent a higher fraction of household income.
Portuguese retail electricity prices of €212.86/MWh in 2017 were among the top 5 highest in the EU (behind Belgium, Germany, Denmark and Cyprus) according to a 2020 report commissioned by the European Commission. As a reference, Sweden had retail electricity prices worth €203.17/MWh, €290.36/MWh for Denmark and €172.85/MWh for Finland. Portugal also consumes an average of 67KWh per year more than the 2633KWh per year EU27 average. Finally, Portuguese citizens also have the 9th lowest median household income in the EU.
According to the Portuguese government, this auction will result in gains for electricity consumers worth €114 million over 15 years, or equivalent to around €7.6 million/year. This value corresponds to a unit gain of around €620 thousand for each MW awarded (15 years).