The electrical reform to lower the price of electricity has caused a stir in the renewable sector on how it can affect the change in the energy model. Analysts acknowledge that there has been a certain “stoppage” as soon as the text approved in RD Ley 17/2021, but it has been temporary. The hunger to invest in the sector remains intact.
“The long-term perception has not changed, investors are seeing the government’s measures as something temporary to their projects,” market sources tell El ESPAÑOL-Invertia.
“It is true that there is a view of lower prices but it is more of a sentiment than a real calculation, and it has only relatively paralyzed decision-making.”
“Investment funds look to the long term when they take on a new renewable project. Nobody invests because the price of electricity is today at 180 euros / MWh nor does they allow investment due to measures that are temporary,” he explains for his part. Ignacio Blanco, director in the commercial area of the firm Andersen.
“It is a norm that affects the parks that are already in operation, but those that are in promotion have more time to wait for the regulation to change, to adopt measures that correct these inefficiencies of the regulator. In the promoters there has been no stoppage nor anyone who has backed down, these measures catch them tangentially although they look at them with caution “.
Even so, the analyst acknowledges that “the sector is concerned and we are studying how this regulation will affect in the medium term.”
This is what it seems after knowing that the North American fund Glennmont has not stopped its decision to land in Spain by acquiring 473 MW from the Valencian group Grupotec.
Auctions and ‘a merchant’
Very different is the report published by the Sectorial Observatory DBK de Informa (subsidiary of CESCE). It ensures that the measures recently implemented by the Government to mitigate the rise in the price of electricity “could endanger” the start-up of some wind and solar energy projects, “as well as the profitability of existing facilities.”
In his analysis, he highlights that the capacity to generate renewable energy in Spain grew 29.9% in the 2019-2020 biennium in relation to 2018 due to the commissioning of the allocated power in the 2016 and 2017 auctions.
“The evolution of the sector in the short term will continue to be determined by environmental protection policies and energy consumption targets from renewable sources, both national and international,” he adds.
The measures will especially affect those parks that are indexed to the wholesale market and, therefore, their generation is paid for based on gas prices.
Project concentration
On the other hand, this Observatory highlights that the sectoral offer presents a high degree of concentration, so that The top five operators achieved an installed power share of 45% in 2020, a percentage that rises to 55% if the first ten groups are considered.
For its part, Association of Electric Power Companies (Aelec), which brings together the great Spanish ‘utilites’, has warned that if the measure of the reduction of remuneration is applied, the paradox would arise that this would be even higher than the price they are receiving from their customers, “reaching the absurdity to have negative net income. “
Thus, it indicates that this measure is based on the assumption that these generation plants are selling their energy at the daily market price, therefore they would be benefiting from the current price escalation. The association clarifies that this mechanism ignores reality, since the energy has already been sold by the traders and acquired by customers at fixed prices lower than the daily market price.
These contracts have been formalized at prices substantially lower than the current prices of the daily market, “so it makes no sense to apply a reduction justified by an assumed income that they do not receive.”
However, according to Aelec, this price is “irrelevant” for electricity companies, since the amount they receive from the daily market for selling the energy from their plants is equal to the amount they pay to buy it back to fulfill the commitments acquired with their customers.
As they have been communicating quarterly to the CNMV, electricity companies have sold 100% of their base production (nuclear and renewable) for 2021 and a percentage higher than 75% of that of 2022 for months, at prices much lower than current daily market prices.
Light prices
And he gives as an example the market price of September 16. “If then it was married at 188.18 euros / MWh, according to the proposed reduction formula, each plant will see its income reduced by 81.1 euros / MWh for each megawatt produced “.
But, if these plants have their production sold, for example, at a price of 60 euros / MWh, they will incur losses of 21.1 euros / MWh, “an economically absurd and unsustainable situation.”
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