On January 26, the first auction is held to award a fixed price for electricity production to the winning renewable plants and very low prices are expected, of about 25 euros per MWh, practically half the price of the wholesale market in recent years and well below the forecasts for the next five years, from 40 to 45 euros per MWh.
More than one thinks that the economic signal of the bids will end the market for long-term power purchase contracts (PPA) -which already adds 7 GW in the Iberian Peninsula-, where prices, depending on the duration of the agreement for the delivery of energy and other elements, are around 35 euros per MWh.
As profitability has to be based on risk and the price of money, prestigious consultants point out that the auctions would have to obtain values of 3%, while with PPAs they are around 5% and with the option of charging only the market price –merchant, in sectoral jargon – they would go up to 7% or 8%.
Based on these figures, some believe that having more than 80 GW with access and connection rights granted, which must be executed in the next five years, on pain of losing the guarantees, these three options should fit, each with its risk and its profitability, despite the fact that the Government has presented a bidding schedule of around 3,000 MW per year for the coming years.
However, a fourth very relevant option is missing, capable of eating the largest portion of the clean energy cake: the facilities promoted by vertically integrated players, which do not have as a reference the price of the wholesale market, but the price of sale to the end customer. , that is, the classic electricity companies -Iberdrola, Endesa, Naturgy and EDP-, which have been joined by the oil companies Repsol and Total, which have entered the business by acquiring relevant customer pools to minimize their risk.
Complex and varied business models
These companies can apply strategies and business models much more complex and varied than the others, combining various types of supplies and related services, from energy efficiency to distributed generation and self-consumption, passing through mobility. They do not depend on auctions – which they reject – or on PPAs, although they are going to take advantage of them.
These large players can develop such a quantity of renewables in the next and immediate years as to leave the auctions only for technologies that require aid and it will be necessary, such as biomass, solar thermoelectric or storage, to reduce third-party PPAs to the minimum expression and totally cancel the sale to merchant.
A single company will be able to take over half of the first renewable auction