EnergyWatch

3 GW of European onshore wind won at an unprecedented spot price

Europe's second-largest wind country has returned from several years of hibernation with record-low prices on 3 GW renewable energy, where wind beat out sun by 2.979 - 1.

Spain is back on the global wind map with a bang. For a country that has not installed a single wind turbine thus far this year, an entire 2,979 MW of the 3,000 MW supply of renewable energy has been awarded to wind projects. With wind prices of EUR 43/MWh, these are the lowest prices ever before seen for a European onshore bid.

This is according to the Spanish Ministry of Energy.

"The tender results show how onshore wind is today the cheapest option for new power generation. Some may think wind energy no longer needs subsidies. But it was the fact the auction offered a guaranteed minimum income that attracted investors and ensured there were enough bids to deliver the low price," says Giles Dickson, CEO WindEurope, in a press release.

"And this is the point – it’s not subsidies but revenue stabilisation mechanisms, addressing the risk of wholesale price volatility, that will be critical to the deployment of onshore wind across Europe at competitive costs. By offering revenue stability, auctions play a crucial role in enabling investors to finance a project – they’re key to making projects happen."

GE behind unknown big winner

Iberdrola participated in the tender, but the energy company – which with 5.5 GW is also Spain's largest developer – did not win a megawatt. The biggest winner in the tender was ultimately a Spanish player, the lesser-known Forestalia. According to Spanish media, it secured no less than 1,200 MW.

It may be surprising that the relatively unknown company is now poised to handle such a huge allocation, which is expected to require investments of between EUR 1.5 and 1.8 million. However, according to newspaper El Confidencial, Forestalia has relatively capable back cover from capital fund Blackrock and GE. The victory also means that the US wind turbine manufacturer has secured a major bridgehead in Europe.

The Spanish newspaper writes that the turbines will be built by GE's US factories. This also means that the blades will be built by GE's new acquisition LM Wind Power, which already carries out production in Spain.

Besides Forestalia and its partners, Gas Natural Fenosa has announced that it has secured 667 MW corresponding to a EUR 700 million investment. The company already has 979 MW of wind power in the bag, albeit in the form of the acquired projects. Here, the developer will not be contributing as much, the turbine supplier has previously pointed to both Enercon and Siemens as well as Gamesa and Vestas.

This somewhat applies to what is probably the best known developer among the winners, Enel Green Power. Via their Spanish subsidiary, the Italians have won a round of half a gigawatt of the tender, and will be contributing somewhat to which turbines will end up decorating the 206 MW farm, set to be won by Siemens Gamesa.

Shadows cast over solar

One would think that solar farm developers would also nab some of the tender. Despite everything, the solar panel technology's costs have declined dramatically over recent years, and a country such as Spain should be fertile ground for creating a business. However, just one measly megawatt has been awarded to solar, despite the fact that it was a technology-neutral tender.

However, the Spanish solar industry has long insisted that solar is disproportionate to wind in the tender. The distortion, whereby solar lost by 1 - 2.979 to wind, is attributed to what WindEurope emphasizes as positive in the tender design – a minimum price.

According to the solar industry, this means that solar bidders were forced to bid higher than what they were actually capable of. Meanwhile, there was a clause which stated that if two bids were identical, the winner would be the one which could offer the most operating hours. In Spain, this is typically the wind turbine.

"As the tender result shows, small and medium-sized solar panel projects did not stand a chance, even with bids of the lowest possible price, due to conditions which favored wind projects and very large projects under the erroneous assumption that there were criticisms which led to optimal prices for Spain," said Anpier, the country's association of solar producers.

However, over at the wind turbine association, the mood is not deflated. In a country which despite several years of stagnation continues to be Europe's second largest wind nation after Germany and where the tender saw wind dominate, there is a need for more if Spain is to live up to its EU obligations, says WindEurope.

"Today’s auction is an important step towards restoring confidence in the Spanish wind market. But there’s still some way to go. Spain should drop the practice of changing the “reasonable return” of projects every six years – it creates instability for both existing and new projects. And the industry looks forward to a clear schedule for future tenders," says Dickson after wind received nearly all the 3 GW renewable energy auction.

English Edit: Lena Rutkowski

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