Portugal claims spot in solar history with record-low auction prices

Portugal’s latest solar auction has concluded with record-smashing low prices, a top government official revealed to PV Tech today.

Speaking before the government formally published the results, Energy state secretary João Galamba confirmed the lowest bid at this month’s PV tender came in at €14.76/MWh (US$16.44, based on current exchange rates).

Galamba described the figure – far below the auction's ceiling prices of €45/MWh (US$50/MWh) – as a "new world record." The tariff was assigned to the largest tender winner, a 150MW project the state secretary would not identify and which competed under the auction’s first of two modalities, featuring a fixed price.

According to him, contracts under this first category featured an average tariff of €20.33/MWh (US$22.66/MWh). Around five projects fell under the €20/MWh mark, reaching tariffs of around €17/MWh.

The state secretary linked the €14.76/MWh milestone to the fierce competition witnessed for some of the 22 lots that were put up for auction. “There were batches where we had more than 20 contenders,” he told this publication.

1.4GW tender ends with 1.15GW of contracts

According to the state secretary, the auction granted solar winners a total of 1.15GW in contracts. The figure falls shy of the 1.4GW it was meant to tender and is little over a tenth of the 10GW that solar developers put forward when bidding opened this summer.  

The tender awarded 862MW of the 1.15GW total through the first modality, intended to offer 15-year fixed-price PPA to players struggling to land these deals or funding support. 

The remaining 288MW were contracted under a second batch, where developments – typically more advanced, with PPAs already negotiated or being negotiated – are made to pay in return for the right to produce at market prices, also for 15 years.

Under this second route, the average contribution agreed by developers reached €21.35/MWh (US$23.78/MWh), Galamba explained. The highest and lowest payment among auction winners came in at a respective €26.75 (around US$30) and €5.1 (US$5.68) for every MWh produced, the secretary added.

At past PV Tech events, some have criticised the second modality for potentially paving the way for speculative bids from players with still-hazy projects. Galamba was confident that the auction design will counter such an eventuality, however.

“We believe the conditions are there to commit participants to real investments. Winners have to pay €50,000/MW in guarantees and are forbidden to sell their licence to another party,” he argued, adding that firms must, regardless of modality, complete their projects within three years.

Foreign solar players reap lion's share

Portugal’s claim to the top spot of global solar auctions follows a similar milestone by fellow Portuguese-speaking state Brazil, which produced PV tariffs of BRL67.48/MWh (around US$17.5/MWh) at a smaller tender open to all renewables.

Galamba described Portugal’s €14.76/MWh figure as “great news” for consumers. “We are really committed to ensure that we can award renewable projects with the lowest price,” he said “It’s the only way that we can bring consumers on board the energy revolution we are trying to drive.”

The state secretary explained a total of 25 projects had finally reaped auction contracts from the 64 finalists, pre-selected in early July. The schemes were put forward by a group of 13 developers, he added.

Galamba wouldn’t comment on reports by Portuguese outlet Expresso that Iberdrola and Total Solar were among the winners, while EDP, EDF, Finerge and Galp failed to reap contracts. He did confirm, however, claims by the same publication that winners were foreign players for the most part.

Portugal’s PV auction series is meant to fuel a surge in installed capacity from 572MW (2018) up to 1.6GW (2021) and 8.1GW-9.9GW (2030). Coming up next is a 700MW second solar tender – set to incorporate the same dual design – and a separate auction for energy storage, both in Q1 2019.

In March, the government told PV Tech the storage tender would likely offer 50-100MW but the capacity figure, Galamba said today, could surpass the initial range. The upcoming shutdown of one of the country’s two coal plants creates a gap the storage auction could help fill, he explained.