European Green Deal Call: what it means for Spain
In September 2020, the European Commission launched its €1 billion call for research and innovation projects that address climate change. The European Green Deal Call aims to adopt green solutions to drive Europe’s recovery from the economic crisis wrought by the COVID-19 pandemic. The goals for the investment include decarbonizing the energy sector and ensuring buildings are more energy efficient, creating opportunities for renewable projects.
Spain is a leader in the push to transition away from using fossil fuels in the energy sector, generating 44% of its electricity from renewables in 2020, according to grid operator Red Electrica. It is holding a series of renewable energy tenders to advance the development of the sector.
What are Spain's renewable targets?
The Spanish government’s Integrated Energy and Climate Plan 2021-2030 sets out a target of installing an additional 60GW of renewable power capacity, so that it reaches a 74% share of electricity generation by the end of the decade.
To help meet that target the government introduced new climate legislation in May 2020, to promote the growth of the green economy as part of its COVID-19 recovery strategy and fulfill its commitment under the Paris Climate Agreement. EU member states are required to submit their National Recovery and Resilience Plans for 2050 climate neutrality to the European Commission by April 2021. And, the investment priorities detailed in those plans, will go towards determining their share of European financing.
The European Green Deal Call will contribute to the ability of countries like Spain to meet their goals.
Spain and its solar tenders
Spain has started 2021 on a positive note, launching tenders for renewable capacity and mechanisms to promote renewables. At the end of last year, the government’s Council of Ministers approved legislation that regulates access and connection permits for renewable installations, providing legal certainty and security in preparation for a ramp up in the deployment of renewables.
Solar wins two-thirds of renewable auction capacity
The Spanish Ministry for the Ecological Transition and the Demographic Challenge (Miteco) launched a tender in December, for an auction held on January 26, to allocate 3GW of renewable power capacity. The auction was the first under its new system, which allocates projects based on price. Bidders submitted the price they would charge for the energy they generate under a 12-year agreement. Miteco had specified that:
1GW of the capacity would be reserved for solar photovoltaic (PV) projects
1GW allocated to wind projects
1GW open to any technology
The auction demonstrated the strong interest in renewables in Spain, as 150 participants registered for the auction and 84 participants bid for a total of 9.7GW of capacity — more than three times the capacity available. Solar technology emerged as the clear winner.
The weighted average price awarded for solar PV was €24.47/MWh, compared with €25.31/MWh for wind. Of the 3,034MW of capacity awarded to 32 projects, 2,036MW was allocated to solar, while 998MW was for wind. The solar installations must be completed before February 28, 2023, while the deadline for wind installations is February 29, 2024.
All 3GW was awarded at prices on average 43% lower than the long-term estimate, which will have the added benefit of bringing down electricity bills in the country. Successive auctions are expected to bring down average prices further as the cost of renewable technologies continues to decline. Miteco estimates that this first round of auctioned capacity will mobilize investments of around €2.1 billion and employ around 27,000 workers.
Spain to ramp up renewable tender capacity to 2025
Miteco has set an annual auction schedule that will see a minimum of 1.8GW of solar PV capacity auctioned from 2021-2025, reaching a total of 10GW of PV capacity allocated for installation by 2030.
The 2021 tender will also include at least 200MW of solar thermoelectric capacity to generate electricity from heat. Concentrated solar power (CSP) systems can use thermal storage to create a flexible electricity source — meeting the challenge of supplying power from solar overnight. Miteco will auction two more blocks of 200MW of solar thermoelectric capacity in 2023 and 2025, to reach a total of 600MW. By auctioning the capacity every two years, Miteco aims to encourage the participation of projects that are large enough to be viable.
Striving towards a completely renewable electricity system
Miteco expects to complement these auctions with other support instruments for renewables, so that the total amount of capacity installed could far exceed the minimum target.
As an example, Spain’s Council of Ministers in December started the process of drafting a law to create a National Fund for the Sustainability of the Electricity System. The fund will finance the costs associated with the remuneration scheme for renewables, cogeneration, and waste rather than raising the money from consumer electricity bills. Instead, the financing will come from charges to:
Gas and electricity trading companies
Wholesale petroleum product operators
Wholesale liquefied petroleum gas operators
Large gas and electricity users
Income from auctions of carbon emissions allowances
Community funds and the general state budget
As part of the push towards a completely renewable electricity system, in January Miteco also launched calls for expressions of interest to promote local energy communities. As well as identify ways to develop sustainable energy on its island territories as a tool for economic recovery against COVID-19 and to advance the deployment of renewables. The deadline for submitting proposals is February 26, 2021.
Potential for new solar energy projects across Europe is vast
Project developers and investors stand to benefit from the commitment of governments across the region to meet climate change targets. The European Green Deal Call is one way that the EU is providing financial support to bring projects into operation. As we have seen, Spain is one of the countries where there is a clear framework for the expansion of solar capacity in the coming years.
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