Abstract
The latest trend of low record bid prices in renewable energy auctions has raised concerns on the effective deployment of the winning projects. A survey of recent auction data from several countries, technologies and remuneration designs is analysed and compared with the corresponding levelised costs of energy (LCOEs) to draw first insights on their viability. A critical assessment of the ability of the LCOE for determining the adequate bid level is then performed and the preliminary unviable results of selected mature technologies are further investigated using improved profitability metrics as the project and equity net present value (NPV) and internal rate of return (IRR). As representative examples, the analysed Danish 2019 onshore wind and photovoltaics (PV) auctions require very specific scenarios to become viable, which cast doubts on their effective implementation. Under the assumptions of a realistic base case, the sensitivity analysis revealed that either 59% of decrease in the weighted average cost of capital (WACC), or 37% of discount on the investment cost or a 3.6% annual increment in the mean market price is needed for achieving the NPV break-even in the onshore wind case. Likewise, the PV case is unprofitable whatever the WACC may be, and either a 60% discount on the investment cost or a 6.8% annual increment in the mean market price is needed for the NPV to break-even. Although some projects could be relying on indirect revenues or additional sources of incomes beyond the auction support, it remains to see if they are finally materialised.
Highlights
The comparison between the levelised cost of energy (LCOE) of each of the auctioned renewable energy sources (RES) technologies listed in Table 1 and an approximation to the mean remuneration that they could receive in the first year of operation is presented
As regards the LCOE and following [30], a 7.5% discount rate has been applied to all the countries belonging to the Organization for Economic Co‐operation and Development (OECD) and
As regards the LCOE and following [30], a 7.5% discount rate has been applied to all the countries belonging to the Organization for Economic Co-operation and Development (OECD) and China, whereas a 10% has been employed for the rest of the world
Summary
Auctions are progressively adopted as a support mechanism for utility-scale electricity from renewable energy sources (RES) by a growing number of countries. In the two-year period 2017–2018, 55 different countries auctioned around 111 GW of electrical capacity from RES. The competitive nature of auctions has played a role in the consistent downward trend followed by the bid prices in the last years. In this sense, reductions near 76% and 17% from 2010 levels have been reported for 2018 global weighted average auction prices of solar PV and onshore wind, respectively (prices from feed-in-premium auctions are not considered in these numbers) [1]. Results on a country-level may vary, these figures expose well the global shift towards reduced support levels
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