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Explaining recent renewable energy auction results in Europe
Dr. Corinna Klessmann & Fabian Wigand, Ecofys
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
We will give further insights in the auction outcomes for
PV, wind onshore and wind offshore, based on AURES
case studies and recent updates
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
Sourc
e:
Ecofy
s b
ased o
n A
URES c
ase s
tudie
s, D
FBE,
BN
etz
A a
nd S
taats
coura
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
6,65,7 4,9
6,9
11,614,3
8,8
10,311,1
0,0
5,0
10,0
15,0
20,0
25,0
2012 2013 2014 2015 2016 2017 2018
€cent/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
7,26,9
6,65,74,9
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
Sourc
e:
Ecofy
s b
ased o
n A
URES c
ase s
tudie
s, D
FBE,
BN
etz
A a
nd S
taats
coura
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
11,614,3
8,8
10,311,1
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/kWhSupport 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…
Sourc
e:
Ecofy
s b
ased o
n A
URES c
ase s
tudie
s a
nd S
taats
coura
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
4,3
2
4
6
8
10
12
2012 2013 2014 2015 2016 2017 2018
€cent/kW
h
IT - onshore
UK - onshore
NL - onshore -average(technologyneutral)
DE- onshore
Auction date
Support period: 25 years in IT, 20 years in DE, 15 yeras in NL and UK
...look different from onshore wind results by realisation deadline
11,8
11,1
8,7
6,7
9,4 9,59,8
8,4
10,4
11,2
9,5
8,78,2
7,4
5,7
4,3
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
Realisation deadline
Sourc
e:
Ecofy
s b
ased o
n A
URES c
ase s
tudie
s a
nd S
taats
coura
nt
Support period: 25 years in IT, 20 years in DE, 15 yeras in NL and UK
Reasons for the higher prices in NL
Effects 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)
11,8
11,1
8,7
6,7
9,6
8,4
10,4
11,2
9,5
8,78,2
7,4
5,7
4,3
2
4
6
8
10
12
2012 2013 2014 2015 2016 2017 2018
€cent/kW
h
IT - onshore
UK - onshore
NL - onshore- average(technologyneutral)
DE- onshore
Auction date
Reasons for the low prices in DE
Preferential rule for community energy projects:
• Low qualification requirements (no permit required)
• Long realization period (54 months)
• Low penalties
Combination of these factors has led to low bids but increased risk of non-realisation
Preferential conditions will be removed in 2018
Auction date
11,8
11,1
8,7
6,7
9,4 9,59,8
8,4
10,4
11,2
9,5
8,78,2
7,4
5,7
4,3
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
Aucti
on r
esult
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
Aucti
on r
esult
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)
Explaining the price difference btw. DE and UK
1. 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
Construction
Grid application & planning construction
DEA DEA TSO DEA developer
BSH BSH BSHDev. via
BSHdeveloper
Developer/TSO TSO
RVO RVO RVO RVO developer
RVO/TSO TSO
Crown Estate Developer DeveloperDev. via
PINsdeveloper
Developer/National Grid Developer/OFTO
20+
BSH developer developerDev. via
BSHdeveloper
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 GmbH
Albrechtstr. 10c
10117 Berlin
Germany
T: +49 (0)30 297 735 79-0
Dr. Corinna Klessmann
I: www.ecofys.com / www.navigant.com
