European PV Fully Enters The PPA Era, Germany's Latest PV Bid Price Is Less Than 0.43 Yuan Per KWh

- Sep 03, 2019-

Last month, AudaxRenovables signed a contract with developer Welink for the construction of a 708MW photovoltaic project on the Iberian Peninsula. The volume of solar installations involved in this huge transaction is from 2013 to 2017 for the entire Spanish plus Portuguese installation capacity. sum.

This is not an isolated incident. Tul Lenkovski, senior manager of professional consulting firm IHS Markit, said that the volume of power purchase agreements in the European market increased from 360MW in 2017 to more than 2.4GW in 2018. These projects have brought together A wide range of investors who do business in different jurisdictions, the common denominator of these projects is that there is no government subsidy.

Peter Alex, head of investor relations at Energiekontor, a German renewable energy project development company, said: "We are competing with market prices." The company has just completed an 85MW photovoltaic power plant in Rostock, Germany, with German power. Operator EnBW has signed a 15-year PPA. “This project has surprised market and politicians, and we can already sell solar power in Germany that can compete with fossil fuels and nuclear energy.”

Anne Joken, head of media at Statkraft, Europe's leading renewable energy supplier, said: "We have seen many projects across Europe, especially in the south." Statkraft completed the PIA signing of the power station agreement in early 2018, from Spain Electricity was purchased from the 175 MW solar power plant in Don Rodrigo near Seville. "With the development of affordable Internet access, there will be a variety of funds to finance new projects, and PPAs will become the most important way."

As European governments gradually phased out subsidies for renewable energy, the news brought a timely respite to the hit European solar industry. Georg Hoffler, investment director of Allianz Renewable Energy Team, said: "In the past, there were many PV projects in Europe but most of them relied on subsidies. Now, unlike investment, the construction is private and there is no government support. ". At the same time, Hoffler also explained that due to the continuous decline in the cost of solar technology, relatively high electricity costs and high-quality lighting have attracted a large amount of funds to invest in Europe, but to ensure the safety of long-term purchase of electricity - this is the decision project The key point of the final deal.

At the end of 2018, when Allianz invested in the acquisition of two solar projects in Portugal, Ourika and Solara4, they were tied to the PPA of AudaxRenovables in the acquisition transaction. Similarly, in December 2018, Munich's Anton Asset Management Corporation (MEAG) acquired the Tang Rodrigo Group's 175MW photovoltaic power station, which also bundled the PPA agreement with the power company Statkraft. Robert Pittman of Munich's Settlement Asset Management Company said, "As long as the purchaser's default is less likely, the power purchase agreement and other conditions are reasonable enough, then financing is not a problem at all. Most other PV projects in the EU will be in the future. Through PPAs to obtain funding, the valid indications we get from banks indicate that they are very interested in providing non-recourse financing to the Don Rodrigo project."

Test and help from the market

Audax Renovables signed two solar projects in Portugal for a period of 20 years. During this period, the company will sell unsubsidized electricity to about 300,000 users in Europe. Audax strategic director Jamie said that "these users are basically in the middle." Small businesses consume a lot of electricity during the day and have little electricity at night. Thanks to the power purchase agreement, we can give them a fixed price, the electricity bills no longer fluctuate too much, and they use 100 % pure renewable electricity."

When asked why the European solar industry did not organize earlier in this way of power purchase agreements, Jamie pointed out that government incentives, such as electricity price subsidies, before the cost of renewable energy technologies is lower than existing energy sources. Net metering prices and project auctions are necessary to promote renewable energy in the electricity market. After successfully passing this stage, the second challenge is to cancel the subsidy. PPA is meaningless until the feed-in tariff subsidy disappears. Because Spanish public utility companies have a legal obligation to purchase renewable energy at a centrally determined cost.

From the perspective of consumer and energy transformation, it is possible for companies to sign long-term power purchase agreements to install more solar energy for the society at a lower cost. Jamie explained, “Every time a PPA is signed, users should cheer and celebrate. If the government wants to encourage PPAs, the best way is to stay away from it. Every time the government says it wants to hold an auction or to give some incentives for new energy. They will cut off the flow of funds until they confirm what will happen next. This delays the promotion of photovoltaics and forces consumers to bear unnecessary costs. Today, Europe's largest and fastest-growing solar projects are not subsidized. They bring the same environmental benefits to the grid and there is no additional cost to the user."

Finally, Jamie said that one area of policy intervention is expected to eliminate market barriers: the European Commission has taken commendable measures to revise the regulatory framework for the European energy sector, removing barriers to signing private PPAs and setting up for 2030. 32% renewable energy target.

Germany's latest joint bidding: PV bid price of 0.0566 euros / kWh (about 0.4272 yuan / kWh)

In a recent joint tender in Germany, solar energy gained an overwhelming advantage and won all project contracts, while land-based wind power had nothing.

At the beginning of April, a total of 18 solar bidders won the bid for 210MW, and PV players led the bidding process, submitting 109 bids for the 719MW project in Germany.

The average contract price for solar projects is 0.0566 Euro/kWh, and individual projects are between 0.045 Euro/kWh and 0.061 Euro/kWh. (RMB 0.4272/kWh, 0.3397 yuan/kWh and 0.4604 yuan/kWh, respectively)

Germany has held a series of tenders, and this joint tender is one of the most recent, and solar energy has become the only winner. In November last year, the solar industry signed all contracts again, with the average price slightly lower than 0.0527 Euro/kWh (about RMB 0.3978/kWh).