What are renewable auctions?
Throughout the past year we have constantly heard about renewable auctions. This Renewable auctions are one of the mechanisms that exist in Spain to intervene on the price of energy and through which it was intended to lower the price of light to 2018 levels. Well, in this post we are going to talk about this topic.
The Ministry for Ecological Transition and the Demographic Challenge has just launched the third auction for the Renewable Energy Economic Regime. As we reported through social networks, on this occasion 500 MW will be auctioned, divided into 200 MW for solar thermoelectric, 140 MW for distributed solar, 140 MW for biomass and 20 MW for other technologies. The auction is scheduled to take place on April 6.
But for many people, renewable auctions are a rather complex term and one that also has a lot of controversy created around it. But don’t worry, in this post we are going to go deeper and solve all your doubts about it.
What is a renewable energy auction? It is a contest organized with the aim of awarding the total power of renewable energies that can produce a power plant between companies in the sector, with a certain profit margin. To this end, companies bid by offering the price they are willing to charge for this electricity, estimating the profitability of their investments.
The regulatory framework for renewable energy auctions is quite complex, but normally the government stipulates that the winners of the auctions can bid their energy at a guaranteed price for between 12 and 15 years. This is how renewables can have their contribution in the national electricity market and can optimize their contribution to achieve maximum savings in the bill.
A very important aspect of the auctions is that all participating companies deposit 60,000 euros for each MW offered. And the companies are paid an amount for each MW they are awarded in the auction. The objective is to provide financial support to boost installed capacity. Although these auctions have been questioned on some occasions.
Now that we have talked about what renewable energy auctions are, let’s talk about the controversy they generate.
Renewable auctions are considered a fair mechanism to guarantee the entry of renewable energies into the energy mix, however, it is true that conditions must be in place to avoid speculation and unequal conditions so that all types of competitors are able to bid in the auction.
In the past, several modifications have been made to the regulation of auctions in this sense since, in addition, for companies to be interested in competing they need to ensure a profit margin that allows a healthy interest in the evolution of this industry.
Not only is electricity rising by the day, but the health of the planet is worsening at the same rate. Therefore, governments must use all the mechanisms at their disposal to ensure a just energy transition that benefits both commercial entities and the citizen and consumer. The first steps have already begun to be taken and we hope that, in the coming months and years, topics such as the one in this article will become more popular and widespread.