The capital of renewables turns to look to the Kingdom of Spain to make investments in photovoltaic energy. Unlike 10 years ago, your income will depend fundamentally on the market instead of what the Ministry of Energy decides.
Unfortunately, the Popular Party broke the legal security of the country, and this scared off investors. In fact, it caused a stop in the country with more sun from all over Europe.
Fortunately, the improvement in the market and the European political consensus reached after the Paris Agreement are attracting investment to Spain towards the PV again, whose penetration into the energy mix barely covers the 3% of demand figure.
With an estimated profitability between 4% and 7% on average, the interest of funds, banks, industrial developers and collateral players begins to generate a new boom in solar energy.
Next we are going to see some of the keys:
Cost reduction of solar photovoltaic
This is the key factor for the big boost that is experiencing this technology globally. Today, photovoltaic panels are ten times cheaper than they were a decade ago.
This means that photovoltaic solar energy is already competitive without the need for subsidies as before. In fact, the last study of the International Renewable Energy Agency (IRENA) shows how the electricity produced with photovoltaic solar is the one that has become the cheapest of all renewable technologies.
The sharp drop in prices is due to manufacturing in China, where practically 100% of the plates are produced. Some consultants specialized in the sector warn that it must be taken into account that the Chinese could start to get more expensive the price of the plates given that they do not have significant competition worldwide.
Lots of sun available
Another decisive factor when it comes to betting on Spain is the capacity that this territory has, given the high solar resource. In fact, it is the country in Europe with the most solar radiation available. The country takes advantage of it to exploit tourism. Unfortunately, energy capacities are underutilized. If we look at the data, in Spain they had been installed at the end of 2017 4.675 MW of photovoltaic power, while in Germany, whose solar resource is much scarcer and has a similar extension of land, there are already more than 40.000 MW in operation.
The future decarbonization
Another important factor to bet on renewables is the high level of commitment that the European Union has acquired in the fight against climate change and decarbonisation.
This forces to put an end to emissions in 2050 and this involves a decisive increase in electricity production through renewables. That is why the member countries are launching auctions to install these technologies that allow them to meet their quotas. To meet the Paris agreements signed in 2015, experts point to the electrification of the economy.
This is making many think that electricity demand will grow strongly in the coming years. Proof of this is the determined bet that many automobile factories are making for the electric car.
Reduce paperwork and less regulatory uncertainty
Photovoltaic energy proved in the last renewable auction that it can compete without public subsidies. That is, at market prices. Fortunately for the state coffers, the dependence of the Administration is less and less. Reduce paperwork when installing new facilities, and respecting the regulatory framework, will help enormously to attract new investments.
PPA (Power Purchase Agreement)
As a novelty, we have a product known as PPA (Power Purchase Agreement). It is a long-term agreement between a generator that sells power at a certain price and a consumer who buys it. This product is being key, given that without government aid, banks and funds are agreeing to contribute capital using this PPA as collateral, which is allowing development outside the recent auctions and any type of aid.
As explained by the general director of the photovoltaic association UNEF, José Donoso, "there are between 1.000 MW and 2.000 MW outside the 4.000 MW awarded in the auction that is being developed right now with PPA or directly at market price." There is even willing investors to assume the risk of volatility offered by the income coming from the wholesale market, which has a fairly large fluctuation.
Another important point is the renewed interest of banks to finance these projects. However, the risk of the market and the bad experiences of the past is making them more scrupulous when injecting funds. However, industry sources explain that there are international banks that are being more active and will also fight the Spanish.
The melon of electricity generation that was in the hands of the large 'utilities' will be increasingly divided. The oligopoly of production is broken. In fact, Pension funds (Allianz, public institutions of Hontario), of venture capital (Cerberus, KKR, Oaktree) or from infrastructure (GIP, Brookfield) foreigners are breaking into the sector with determination.
