Ecofys explaining recent renewable energy auction results in Europe
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Explaining recent renewable energy auction results in Europe Dr. Corinna Klessmann, Ecofys 12 December 2017
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Transcript of Ecofys explaining recent renewable energy auction results in Europe
Explaining recent renewable energy auction results in EuropeDr. Corinna Klessmann, Ecofys
12 December 2017
Low bids in recent renewables auctions in Europe have made the news
Source: Bloomberg 2017
Source: Greentech Media 2017
This presentation will take a closer look at the auction outcomes in different European countries
A word of caution: Auction prices dominate the news but comparing auction outcomes of different countries risks comparing apples to oranges
This presentation will give further insights in the auction outcomes for PV, wind onshore and wind offshore, based on AURES case studies and recent updates
A core indicator for assessing the effectiveness of RES auctions are realization rates; these are not yet available for most of the auctions analyzed
The solar PV auction outcomes in France, Germany & the Netherlands
Overall auction outcomes for solar PV have decreased substantially• Support period: 20 years in FR and DE, 15 years in NL
Sou
rce:
Eco
fys
base
d on
AU
RES
cas
e st
udie
s, D
FBE,
BN
etzA
and
Sta
atsc
oura
nt
Auction date
22,9
21,8
22,0
19,4
20,0
16,816,5
15,313,9 13,5
13,1
15,8
12,9
10,710,7
8,2
6,45,6
9,2
8,5 8,07,4
7,26,9 6,6 5,7 4,9
6,9
11,6 14,3
8,810,3
11,1
0,0
5,0
10,0
15,0
20,0
25,0
2012 2013 2014 2015 2016 2017 2018
€cen
t/kW
h
FR - rooftop PV 110-250kW (old)
FR - rooftop PV 250 kW -3.5 MW (old)
FR - rooftop PV 100 kW -8 MW (new)
FR - PV 500 kW-12 MW(old)
FR - PV 0.5-17 MW (new)
DE- PV (technologyspecific)
NL - PV (technology-neutral)
Continuous price decline for solar PV in France and Germany
Overall price decline of 46-53%Reasons for price reductions : • Technology cost
reductions• Competitive pressure
forces bidders to reduce margins
• Improvement of French rooftop auction design after 2012
• Eligibility of greenfield sites in German auctions (2017 onwards)
Auction date
22,9
21,8
22,0
19,4
20,0
16,816,5
15,313,913,5
13,1
15,8
12,9
10,710,7
8,2
6,45,6
9,2
8,58,07,4
7,26,96,65,74,9
0,0
5,0
10,0
15,0
20,0
25,0
2012 2013 2014 2015 2016 2017 2018
FR - rooftopPV 110-250kW (old)FR - rooftopPV 250 kW -3.5 MW (old)FR - rooftopPV 100 kW - 8MW (new)FR - PV 500kW-12 MW(old)FR - PV 0.5-17MW (new)
DE- PV(technologyspecific)
Roof-top PV
Ground-mounted PV
€cent/kWh
Fluctuating PV prices in the technology-neutral Dutch scheme
Sou
rce:
Eco
fys
base
d on
AU
RES
cas
e st
udie
s, D
FBE,
BN
etzA
and
Sta
atsc
oura
nt
Auction date
15,8
12,9
10,710,7
8,2
6,45,6
9,2
8,58,07,4
7,26,9 6,65,74,9
6,9
11,6 14,3
8,810,3
11,1
0,0
5,0
10,0
15,0
20,0
25,0
2012 2013 2014 2015 2016 2017 2018
FR - rooftop PV110-250 kW(old)FR - rooftop PV250 kW - 3.5MW (old)FR - rooftop PV100 kW - 8MW (new)FR - PV 500kW-12 MW(old)FR - PV 0.5-17MW (new)
DE- PV(technologyspecific)
Main reasons for price fluctuation:
• Level of competition for PV – very high in 2012 & 2015, low in 2014 & 2017
• Availability of cheaper technology options
• Available support budget (auction volume)
€cent/kWh Support period: 20 years in FR and DE, 15 years in NL
The onshore wind auction outcomes in Italy, Germany & the Netherlands
Onshore wind results by auction date…
Sou
rce:
Eco
fys
base
d on
AU
RES
cas
e st
udie
s an
d Sta
atsc
oura
nt
11,8
11,1
8,7
6,7
9,6
8,4
10,4
11,2
9,5
8,78,2
7,4
5,7
4,33,8
2
4
6
8
10
12
2012 2013 2014 2015 2016 2017 2018
€cen
t/kW
h
IT - onshore
UK - onshore
NL - onshore -average
DE- onshore
Auction date
Support period: 20 years in IT, 20 years in DE, 15 years in NL and UK
...look different from onshore wind results by realization deadline…
11,811,1
8,7
6,7
9,4 9,59,8
8,4
10,4
11,2
9,5
8,78,2
7,4
5,7
4,33,8
2
4
6
8
10
12
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
IT -onshore
UK -onshore
NL - windonshore -averageDE-onshore
Realisation deadline
Sou
rce:
Eco
fys
base
d on
AU
RES
cas
e st
udie
s an
d Sta
atsc
oura
nt
Support period: 20 years in IT and DE, 15 years in NL and UK
...and differ in net present values of future support payments
11,811,1
8,7
6,7
9,4 9,59,8
8,4
10,4
11,2
9,5
8,78,2
7,4
5,7
4,33,8
2
4
6
8
10
12
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
IT -onshore
UK -onshore
NL - windonshore -averageDE-onshore
Realisation deadline
Sou
rce:
Eco
fys
base
d on
AU
RES
cas
e st
udie
s an
d Sta
atsc
oura
nt
Support period: 20 years in IT and DE, 15 years in NL and UK
...and differ in net present values of future support payments
Sou
rce:
Eco
fys
base
d on
AU
RES
cas
e st
udie
s an
d Sta
atsc
oura
nt
Support period: 20 years in IT and DE, 15 years in NL
Auction date
Full load hours: 2700 / Turbine capacity: 2,85 MW / ROI: 5,5% / Inflation: 2%
0 €
50.000 €
100.000 €
150.000 €
200.000 €
250.000 €
300.000 €
350.000 €
400.000 €
450.000 €
2016 2017 2018
Pres
ent
valu
e of
sup
port
pay
men
ts 8,78,2
7,2
6,7
5,7
4,3
3,8
Assumptions:
Reasons for the higher prices in NLEffects of the technology neutral auction:
• In 2012-2013, wind had to compete against other cheap sources lower prices
• With increasing support budget, wind onshore has faced hardly any competition since 2014 all bidders bid close to their ceiling price
• The NL government has reduced the ceiling prices for onshore wind, but they remain higher than auction outcomes in other countries
Shorter support period than other countries (15 years)
11,811,1
8,7
6,7
9,6
8,4
10,4
11,2
9,5
8,78,2
7,4
5,7
4,33,8
2
4
6
8
10
12
2012 2013 2014 2015 2016 2017 2018
€cen
t/kW
h
IT - onshore
UK - onshore
NL - onshore- average
DE- onshore
Auction date
Reasons for the low prices in DEPreferential rule for community energy projects: • Low qualification
requirements (no permit required)
• Long realization period (54 months)
• Low penaltiesCombination of these factors has led to low bids but increased risk of non-realisationPreferential conditions will be removed in 2018
Auction date
11,811,1
8,7
6,7
9,4 9,59,8
8,4
10,4
11,2
9,5
8,78,2
7,4
5,7
4,33,8
2
4
6
8
10
12
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
IT -onshore
UK -onshore
NL - windonshore -average
DE-onshore
The offshore wind auction outcome in Denmark, UK, the Netherlands &
Germany
0
50
100
150
200
250
2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Auc
tion
res
ult
in E
UR
/MW
h
commissioining date
Auction outcomes for offshore wind in Europe
Technology innovation and high competition have led to decreasing offshore prices
Source own representation based on Kitzing and Wenndring 2016, Prognos & Fichtner 2017
*
* 2012 real prices corrected for inflation
Support period: up to 20 years in DK, 15 years in UK, 15 years in NL, 20 years in DE
0
50
100
150
200
250
2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Auc
tion
res
ult
in E
UR
/MW
h
commissioining date
Auction outcomes for offshore wind in Europe
Zero-support bids were awarded in DE for projects to be commissioned by 2024/2025
Source own representation based on Kitzing and Wenndring 2016, Prognos & Fichtner 2017
*
* 2012 real prices corrected for inflation
Securing market share and opt-out option incentivized aggressive bidding in DE
• Auctions act as a door keeper to the grid and the electricity market
• Winning in the auction is the only way to become eligible for grid connection and access the electricity market
• Opt-out option: Award as an option for the future because final investment decision not required before the early 2020s (penalty until financial close only 30 €/kW)
Zero bids in DE are not the same as zero-support under UK CfD
Revenue and support under CfD in UK
€/kWh
Support under CfD
Revenue under CfD Long term market price development
Auction price
Zero bids in DE are not the same as zero-support under UK CfD
Revenue and support under CfD in UK
€/kWh
Support under CfD
Revenue under CfD Long term market price development
Auction price
• Level of revenue is given by the auction price under a CfD
• Auction price used to calculate difference to market price operator will be paid or needs to pay back, depending on actual electricity price
• “Zero bids” would result in a revenue level of zero
Zero-bids in DE not really zero: developers still receive revenue from market
21
Revenue and support under a sliding market premium
€/kWh
Support under sliding FiP
Revenue under sliding FiP
Long term market price development
Auction price
Zero-bids in DE not really zero: developers still receive revenue from market
22
Revenue and support under a sliding market premium
€/kWh
Support under sliding FiP
Revenue under sliding FiP
Long term market price development
Auction price
• Revenue under sliding FIP is not given by the auction price only, but also by the market price
• “Zero bids” mean that project will be built without subsidy
• Developers still receive revenue from the sale of electricity
Explaining the price difference btw. DE and UK1. Structure of the support payment
• UK CFD: If the market price is above the auction price, the operator pays the difference. Bidding for fixed price
• DE sliding FIP = asymmetric CFD: If the market price is above the auction price, the operator keeps the difference. Bidding for minimum price
2. Costs for development and grid connection: • UK: grid connection paid by developer (~ 11 GBP2011/MWh)• DE: grid connection paid by TSO
3. Commissioning date: • UK: commissioning date is 2022/23, DE: commissioning date is
2024/25 (of zero-support projects awarded)4. Funding period:
• UK: 15 years, DE: 20 years
Member States allocate responsibilities for site development differently • The model in the UK is "decentralized“:
• Costs of site development, permits, grid connection, etc. are borne by the developers
• In DE (from 2021), NL, and DK there is a centralized approach• Government agencies and/or TSO are responsible for several stages of site
development & grid connection
Source: Ecofys
Zone identification
Site selection
Site investigatio
nPermitting Constructio
n
Grid application & planning construction
DEA DEA TSO DEA developer
BSH BSH BSH Dev. via BSH developer
Developer/TSO TSO
RVO RVO RVO RVO developerRVO/TSO TSO
Crown Estate Developer Developer Dev. via PINs developer
Developer/National Grid Developer/OFTO
20+
BSH developer developer Dev. via BSH developer
Developer/TSO TSO17/18
A
A
A
A
A
TSO Government agency Private developer
DEA/TSO TSO
Lessons learnt
Lessons learnt from European auction results
• Competition in auctions contributed to a decrease in prices for all technologies. Securing market access further incentivized aggressive bidding for offshore. Questions about future viability and realization.
• In case of limited competition (mainly for low-cost options in technology neutral auctions), auction prices increased despite falling technology costs.
• Consider differences in support framework (e.g. market premium and connection responsibility) and auction design (e.g. penalties and delivery periods) when comparing prices.
Contact
Ecofys Germany GmbHAlbrechtstr. 10c
10117 Berlin
Germany
T: +49 (0)30 297 735 79-0
Dr. Corinna Klessmann
I: www.ecofys.com / www.navigant.com
AURESCommunication and web:
Michael Minter
Head of Secretariat
Kattesundet 4, 3rd floor
DK-1458 København K
+ 45 26 16 64 14
Project coordination:
Lena Kitzing
Researcher
Frederiksborgvej 399
DK-4000 Roskilde
+45 24 65 90 64
Poul Erik Morthorst
Professor
Frederiksborgvej 399
DK-4000 Roskilde
+45 46 77 51 06
Visit our website:
www.auresproject.eu
Follow AURES on Twitter
@AURESproject
Auction prices in DNK have increased in 2010 and decreased since then
High prices in Anholt tender attributed to risk (high penalties and short realization time) and a more attractive UK offshore market
AuctionYear
Area Capacity[MW]
Strike price
[€/MWh]2010 Anholt 400 141.0
2015 Horns Rev III 400 103.1
2016 DanishNearshoreTender
450 64.0
2016 Kriegers Flak 600 49.9
Sources: DTU, 2015. TKI, 2015, IEA, 2017, South Baltic Offshore, 2017
After the Anholt (2010) and Horns Rev 3 (2015) auctions, prices decreased by 51% to €49.9/MWh with the Kriegers Flak wind farm (2016)
Lower costs have contributed to decreasing prices
• Economy of scale
• Improved wind turbines
• Reduced cost of capital
• Reduced margins
T5 Increased experience and innovations in installationT4 Increased availability
T1 Design improvements WTGs, and innovations and improvements in foundation design
M1 Reduced steel pricing
T3 Switch to 55 kV
M2 Third party WTG O&M
F1 Reduced financing costs
M3 Reduced insurance costs
F2 Reduced return on equity
M4* Residual level
P1 Permit and policy improvements
Sources: TKI 2017, Ecofys analysis
Analysis of NL tender for Borsele I & II
3%2%
6%
23%
1%
13% 6%5%
13%
18%
10%
Reasons for decreasing costs
Background on Dutch SDE+ scheme
Technology neutral budget cap increases competition between technologies
More expensive options such as solar-PV can obtain SDE+ in free category; they mainly come into play when cheap options are not available
Less expensive technologies face little competition and bid up to technology-specific ceiling price
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
0
500
1000
1500
2000
2500
3000
3500
4000
2012 2013 2014 2015
Cos
t pr
ice
ration
(M
€/PJ
)
SD
E+ a
war
ded
(€m
ln)
Wind op land Afvalverbranding Bij- en meestook
Allesvergisting Mest covergisting Mest monovergisting
Thermische conversie Ketel biomassa AWZI/RWZI thermische drukhydrolyse
Groen gas Waterkracht Geothermie
Zon-PV Zonthermie Cost price ration (M€/PJ)
Cost/price ratio in M€/PJ0.6 0.9 1.8 1.0
