Solar power with storage “already profitable” in Iberia

Sep 2, 2020 | Montel

(Montel) The results of last week’s solar tender in Portugal show that projects with storage are already profitable and suggest more may be on the way, industry experts have told Montel.

The results of the tender indicate “the beginning of a new era” of hybrid solar energy and storage projects, said senior consultant Ignacio Cobo, head of Portuguese market at Afry.

“The returns on investment [from the hybrid projects] are already hand in hand or just below pure solar,” he added.

Last week’s Portuguese tender for 670 MW awarded 72% of the capacity to solar projects with storage and broke the world’s lowest price record at EUR 11.14/MWh for a fixed price project of 10 MW.

“What the market is saying [is that] solar projects with storage are already profitable,” agreed Jose Donoso, director of the Unef solar lobby.

He pointed out that because the projects should be completed by 2024, “price cuts are being discounted for that year”. 

Most of the storage projects will likely be in batteries, although some mini-hydraulic systems could also be used, Donoso said.

The storage scheme is one of three offered in the recent tender, with the others based on a fixed price or compensation.

Afry’s Cobo said interest in the new storage scheme had picked up pace in recent weeks compared with what appeared to be muted interest earlier in the year.

“What we have seen are big players who had the business model with storage very well established and [the tender] was a small nudge,” he added.

Under the new scheme, all plants must be connected to the grid by 2024, while in the storage mechanism at least 20% of the capacity must be used for energy storage.

If a majority of battery capacity is confirmed, Portugal would become a European leader with at least 100 MW installed by 2024, according to the industry experts. 

Is Spain the next market?
Projects with storage have matured and tenders in Spain could be next to see these results, said Cobo.

Yet Donoso pointed out differences between the Spanish and Portuguese tender systems. 

In Spain companies apply for grid access points, whereas in Portugal firms only get one if they are awarded capacity, he said.

Moreover, Portugal offers subsidies for storage and the winners of a very competitive tender could be counting on it. As a result, the “bids can be more aggressive”, he added.

What the results illustrate and what the sector is realising is that this year’s tender has been “much more competitive” than last year’s, Cobo added.

Enel, which was awarded a 99 MW lot in last week’s tender, plans to use batteries for storage, according to a company spokesperson. 

Renewable projects with storage enable ancillary services to be provided to the grid, as well as allowing for the mitigation of the intermittency of renewable sources.

Thus, its profitability “is strongly linked to the regulatory schemes, which might differ from country to country”, the company added. 

Reporting by:
Belén Belmonte
15:09, Wednesday, 2 September 2020