In Spain, renewable energy works through auctions. An auction is capable of allowing installations that have to do with renewable energies to receive public aid for their installation. In this way, the role of alternative energies in our country can be reactivated for the national market. Therefore, we are going to dedicate this article to tell you the importance of renewable auctions.
If you want to know more about how renewable auctions work, this is your post.
What are renewable auctions
Due to the sun tax approved by the PP government at the hands of Mariano Rajoy, the tax was established on all those facilities that worked with renewable energies. After spending many years with the renewable sector paralyzed, it has been possible to carry out new renewable auctions in Spain that have allowed the facilities that work with this green energy to receive help from the state for their installation and operation. This is how we achieve that renewable energies can once again have their place in the national market.
Renewable auctions are those events that serve to assign the specific remuneration regime to new electrical energy production facilities that work from renewable energy sources. This auction is really complicated and has a very extensive and difficult to understand regulations. After several years of operation, these auctions have been modified after the dubious results that have been obtained on some occasions. In these results, all megawatts have been awarded without any type of premium. That is, at the pool price. When you hear this, you can think that it is good news, but there are many doubts about whether the megawatts that have been awarded will finally be built one day. To finish installing the facilities at market price, no one shows up for an auction.
Operation of renewable auctions
We are going to try to explain a little in detail and in a simple way how renewable auctions work. The normal thing is that the total volume of power that is usually auctioned is 2.000 megawatts with another 1.000 megawatts that come from the ministry and are left in the bedroom in case some of the conditions that have been established are met. Without any discrimination, all the megawatts that are auctioned are entirely for technologies that work with renewables.
In this auction you can bid both wind farms, such as photovoltaic, thermosolar, hydraulic and biomass installations. There are people who spread some rumors in which they say that the 1.000 additional megawatts offered by the ministry are reserved for renewable energies that work with photovoltaic panels. This may make some sense since our country has great potential in this type of energy due to the large number of hours of sunshine that we have at the end of the year.
All the companies that decide to participate in the renewable auctions have had to deposit a guarantee of 60.000 euros for each megawatt that will be offered. This guarantee ends up being totally or partially lost if they are finally awarded and do not meet a series of milestones to be imposed by the ministry. One of the aspects that attracts the most attention in the world of renewable auctions is that the objective is to give economic aid to be able to boost the amount of installed energy and not the energy that is generated. That is, companies must charge a specific amount for each megawatt they get in the auction. and that they finally end up building regardless of whether later that installation generates the most amount of energy or less.
For the energy generated in the facilities, they will be charged at the pool price. The idea of this type of auction is to be able to promote the generation of renewable energy at a lower cost and that implies a greater participation by all companies and the government. Renewable energy in our country had always been charged with a premium according to the energy that was generated and never with the power that had been installed.
Marginalist auction
As in all auctions that can be held in the world, the ultimate goal is to set a fixed final price. This case is the one that tries to sell this price somewhat lower than normal in terms of the percentage of the aid that the government is going to grant. With this help, you must mark how much you are willing to give up for installing renewable energy generation. It is a type of marginalist auction where all bids are ordered from the cheapest to the most expensive. The final objective of the last offer is to fill the quota that will be charged to the rest of the participants.
Almost the entire industry is clear that the auction will end up being at a zero price. This means that there will be no kind of public aid. The main objective for which renewable energy generation is not installed and when there are no auctions is that, if you are awarded and you execute the project successfully, the ministry must guarantee you a minimum price to charge for the energy that you sell in the market. This price in the wholesale market is known as pool and tends to drop significantly in the following two years.
What happens if there is a tie in the auction? In this situation, a discrimination is made by technologies in which all those that have more equivalent hours are benefited. Namely, all those technologies that are capable of producing more energy per unit of time. These figures are usually practically impossible to obtain at the moment of truth, but they serve as a reference when it comes to discriminating between technologies in the event of a tie.
What Happens After Renewable Auctions?
Once the renewable auctions have ended and all the megawatts have been awarded, is the moment in which all the companies that have been awarded part of those megawatts start up the necessary projects to be able to build the facilities that can generate the amount of energy equal to the one they have been awarded.
The terms given in these renewable auctions are small and controlled by the administration. It is the ministry that has placed a series of control milestones by which companies must advance their projects within the deadlines.
I hope that with this information you can learn more about renewable auctions.