Kim Keats: As an economist, for me, a bubble is an investment explosion that leads to imbalance, falling prices, and where investors do not meet their expectation of return of capital. So the fundamental question is: How much renewable electricity can be absorbed economically? If more renewable capacity comes onto the market (due to a speculative bubble or a government push) then the energy prices will collapse and other sources of income will be needed. Almost 4 GW were added in 2019 (compared to 2.6 GW in 2018). We are definitely in a boom but it is still too early to determine if this is a bubble.

In Spain wind and PV have reached grid parity, they are competitive in the current market situation without a Feed-in-Tariff. In addition, there is a great deal of interest from developers, sponsors, investors and banks to develop projects without auctions. There are almost 33 GW of new projects that have been granted access and connection permission, while another 100 GW have requested it and are in the pipeline.

Auctions should only be an option to help achieve the PNIEC (National Energy and Climate Plan) objectives so promoters can participate in them, or develop projects through market mechanisms, according to their criteria.

Kim Keats from EKON Strategy Consulting noted that: Forcing the entry of renewable capacity could cause imbalances in the market, affecting the profitability of projects and their ability to repay the debt. Furthermore, it is important that any regulatory mechanism that the Government decides to implement, auctions, green certificates or others, should not discriminate against assets that are already in operation based on their launch date.

IBERIAN ELECTRICITY MARKET REPORTS – SOLAR PV & WIND are now available. Click here to Download Report Brochures