Renewables

Spain gets Europe’s lowest wind energy price with CfD auction model

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Photo: Pixabay/enriquelopezgarre

Published

January 28, 2021

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Published:

January 28, 2021

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Spain has auctioned a total of 3 GW of renewable energy capacity under the country’s new auction design, the Contracts-for-Difference (CfD) model, resulting in the lowest ever price for new onshore wind energy in Europe, of EUR 20 per MWh, according to WindEurope.

The CfD model brings the lowest prices for renewables because it minimizes the financing costs of new projects. CfDs are cheap for governments, as governments get paid back as well as paying out. In this way, citizens win twice, both as consumers and taxpayers, according to WindEurope CEO Giles Dickson.

CfDs are cheaper for both governments and consumers than other incentive schemes

With CfDs, a model advocated by WindEurope, wind farms pay back when the market price exceeds the auction price, while governments only pay out when the market price is lower than the auction price, making CfDs cheaper for governments and consumers than other support schemes.

Awarded projects in Spain may opt to sign PPAs after selling defined amounts

In the January 21 auction, successful bids are awarded 12-year CfDs. Awarded projects must sell a defined amount of electricity to the market under the CfD contract, but once the threshold is reached, they can either opt to continue selling their electricity under the CfD or, for example, sign corporate renewable power purchase agreements (PPAs) with industrial customers.

Wind projects awarded 1 GW, with at least 1.5 GW more to be auctioned in 2021

The January 21 auction comprised three separate pots – 1 GW of wind energy capacity, 1 GW of solar PV, and another 1 GW for all renewable energy sources combined. The wind energy was awarded a total of 1 GW, whereas the technology-neutral pot went completely to solar. The wind bids ranged from EUR 20 per MWh to EUR 28.89 per MWh.

The Spanish government will auction 1.5 GW annually between 2021 and 2025 under the wind-only pot. Wind Europe also recalled that the January 21 tender for 3 GW was a delayed 2020 tender, meaning that Spain will hold another auction for at least 1.5 GW MW of wind energy in 2021.

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