While the Government had planned auctions for the end of March, these have been delayed because of COVID-19. However, a large proportion of the growth in renewable energy is expected to be delivered by merchant plants, given the increasing cost-competitiveness of wind and solar technologies.
Spain has been hit hard by COVID-19. As is the case elsewhere, pressure on international supply chains and difficulties moving key staff around will delay construction on some projects. However, the Government gave exemptions to developers to continue working on some renewables projects during the shutdown, and manufacturers with Spanish operations – such as Vestas, Siemens Gamesa and LM Wind Power – resumed production after a two-week halt.
Of bigger concern to developers, particularly of merchant projects, is the impact of the economic lockdown and any subsequent downturn on power prices. Wholesale power prices in Spain’s pool were down 63% year on year in early April. However, futures prices are recovering, signaling that the market sees the impact as short-term.
Meanwhile, flagship Spanish energy companies have signaled their determination to continue investing in renewables. Iberdrola, for example, unveiled a “global action plan” in response to COVID-19, including a commitment to accelerate its €10b investment plan. Endesa is also continuing with its planned increases in renewables capacity.
Low power prices do, however, make it challenging to sell corporate power purchase agreements (PPAs) to local buyers. Most domestic buyers are driven by near-term cost, rather than sustainability considerations or the advantages of using PPAs to lock in long-term power prices – current low pool prices provide an attractive opportunity to do so.
At the present time, many PPAs are sold to corporate buyers outside of Spain. For example, Amazon has entered into PPAs with two Spanish projects, the latest being a 50MW solar farm in Aragón. In December, energy trader Statkraft entered into a 10-year PPA with five solar projects, totaling 252MW, while Heineken has struck a deal with Iberdrola to support a new 50MW solar plant in Andévalo, and AB InBev has signed a 10-year virtual PPA for 130MW of solar power to cover its pan-European operations.