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When the minister of environment and energy announced a ceiling tariff of €45/MWh, analysts speculated the price would be too low as it undercut average bidding prices in the region. Preliminary, unconfirmed results of the exercise show, however, companies are happy to bid for two-cent solar in Europe.
The minister’s gamble on a low solar electricity price ceiling appears to have paid off.
Portugal’s solar auction is attracting record low bids for the Iberian peninsula, let alone Europe.
Portuguese newspaper Expresso claimed on Friday to have obtained information from companies involved in the tendering exercise that indicated significant chunks of the 1.4 GW of generation capacity on offer have been allocated for around €20/MWh (€0.02/kWh).
Earlier this month, Portugal’s minister of the environment and energy transition, João Pedro Matos Fernandes, announced a ceiling price for the tender of €45/MWh. In an interview with domestic financial newspaper Sapo, the minister said he was aware average prices for solar in the region were around €55/MWh.
In a southern European context, Greece recently allocated 143 MW of new solar generation capacity for €62/MWh. The Iberian peninsula, however, has attracted subsidy free solar projects in recent months at power prices as low as €27/MWh.
Two types of offer
Developers in the Portuguese tender could present two kinds of offer: one with a fixed price below €45/MWh and another with a variable tariff which includes a requirement to pay compensation to the electricity system, depending on spot market power prices. When a project price is higher than the market price, the Portuguese government will pay the project the difference. When the market price is higher, the project owner makes up the gap.
According to Expresso, at least one 200 MW slice of capacity has been allocated under the variable tariff scheme at a price of €23/MWh and several other capacity allocations received bids for the fixed tariff scheme of around €20/MWh.
The minister’s judgement in undercutting what was the average solar price will be proved right if the newspaper report is accurate.
The solar auction was held on Thursday, Friday and yesterday. The final results are subject to jury approval, with an option for companies to hold a hearing if they wish to contest a bid. The results will be formally published by August 10, by the Directorate-General for Energy and Geology.