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Increased cost demands and poor design compromise auction in Spain


The outcomes of Spain’s 2022 onshore wind auction have been made public. Numerous wind energy projects submitted bids. However, due to a defective “hidden” price cap and a combination of current cost pressures, just 46 MW were awarded. The Spanish renewable energy auction in 2022 was a huge letdown. 1.8 GW for solar PV and 1.5 GW for onshore wind out of a total of 3.3 GW were up for bid. There were only 46 MW of new wind energy contracts awarded. The auction’s failure to account for the rising costs of new wind energy projects was the primary cause.

The Spanish also used a “hidden” price cap when conducting this auction. The cap’s value had to be conjectured by the wind farm developers. At the same time, companies had to adjust their offers to account for the current inflation rate, supply-chain delays, and high raw material and transportation prices. The identity of the secret cap is still unknown. The data lead us to believe that it was close to €47/MWh. Most wind energy developers placed their bids above this amount. This is not shocking because €47 does not meet current expenses.

The outcomes also serve as a warning to other European governments who haven’t yet adjusted their national auctions to account for increasing expenses. The German Wind Energy Association recently issued a warning that similar low auction results would occur from Germany’s existing ceiling price. The average cost of the few accepted proposals was €42.78/MWh. Compared to previous Spanish onshore wind auction pricing, this is far more expensive. Spain received bids as low as €20/MWh in the January 2021 auction.

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Wind energy is still less expensive than all other types of fossil fuel electricity generation, notwithstanding recent price increases. Every new wind turbine brings down costs for businesses and people in Europe while reducing expensive CO2 emissions. From November 17 to November 23, wind energy supplied 57% of Spain’s electrical needs. This significant amount of wind contributed to a 29% weekly average reduction in electricity prices. The 28 GW of wind turbines in Spain saved its citizens €4 billion in 2021.

By 2025 and 2030, respectively, Spain desires 40 GW and 50 GW of wind energy. Up until 2030, this calls for 2.5 GW of new wind capacity annually. Spain only conducts one auction round a year, so the results of the 2022 auction will have a significant impact on Spain’s goal. The capacity that was not assigned during the auction round is still available. It will be included in the auction in 2023.

Spain now needs to make sure the next auction is successful to make up for this one that failed. They must fix the problematic “secret” price cap mechanism immediately. And more permits must be issued for brand-new wind farms. Around 2,000 wind energy projects in Spain are awaiting permits. Particularly concerning is the urgent need for Environmental Impact Assessments (EIAs) to be approved for 19 GW of new onshore wind projects. These projects must begin the EIA process all over again if they are not approved by January 23, 2022. According to Giles Dickson, CEO of WindEurope, that will set them back 1-2 years.

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“All upcoming auctions ought to be indexed as well to account for potential increases in commodity prices. That is true of all auctions, not just Spanish ones. According to Giles Dickson, other European governments should be aware of the higher costs associated with brand-new wind projects. Spain is making progress with offshore wind in the meantime. Before the end of the year, the Maritime Spatial Plan will probably be completed, and the offshore wind regulatory framework will follow in Q1 2023. The first offshore wind auction in Spain might then happen in Q2 2023.

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