Meet the Law | Solar Auction 2020 - Public session presentation to investors

The Solar Auction 2020 was presented today on an online session. As explained by the Secretary of State of Energy, João Galamba, the Government intends to maintain the auction although it will only be launched when the market allows it.

From the presentation, it is worthwhile to highlight the following aspects:

1.    The competitive procedure will encompass a total of 700 MW, distributed among lots located in Alentejo and Algarve (south of Portugal) and the injection capacity in each lot will vary from 10 to 100 MW.

2.    The competitive procedure follows the same rules of the previous auction (three staged procedure, similar requirements and criteria for award - which is the NPV of all projects).

3.    The main innovation is the introduction of a third modality of offers for the PV plants with storage. The benefit of each offer to the system is converted into a NPV and the offer - irrespective of the modality - which achieves the higher NPV for each lot wins (i.e. neutrality of technology).

4.    The three modalities are as follows:

• General remuneration (without storage): where bidders offer a contribution to the system (same as the previous auction);
• Guaranteed remuneration: where bidders offer a discount to reference price (same as previous auction);
• General remuneration (PV plant with storage): where bidders offer a discount to a reference capacity payment (calculated in €/MW/year).

5.    In the general remuneration (PV plant with storage), the awardee will:

• Sell its output in the wholesale market (no guaranteed remuneration scheme to generation);
• Be entitled to receive the capacity payment resulting from its offer;
• Have to enter into a one-way contract for differences (CfD) with the Transmission System Operator (TSO) (draft of such contract will be made available during the tender) whereby the promoter will have to pay a penalty to the system if the market price is above the strike price. Strike price will be calculated on the basis of the marginal costs of a combined cycle power plant;
• Comply with specific technical standards still to be defined (e.g. storage capacity of minimum 20% of the total capacity of injection of the plant and minimum of 1 hour of storage).

6.    NPV of offers will be calculated using the formula €/MW and not €/MWh as in the previous auction. Conversion of €/MWh to €/MW will be made using the estimation of generating hours in each injection point.

7.    Contracts under the auction are valid from 15 years.

8.    Promoters offering in modalities general remuneration (without storage) and general remuneration (PV plant with storage) will receive guarantees of origin (GO). In the guaranteed remuneration scheme promoters will have to pay the fee for issuance of the GO's but will not benefit from them.

The presentation may be consulted here.