Solarletter #14_EN - Low electricity prices pose a threat to photovoltaics
Also: Overparticipation in the latest auction in Germany, Renewable auction in Colombia awards 4.4 GW to photovoltaics and Other manufacturers embarking on the journey to the Americas
Please note that text below has been translated from the spanish version by using AI
Hello everyone and welcome back to Solarletter. My name is Imanol Matanza, and I aim to share with you the latest news, technological advancements, and trends in the field of photovoltaic energy. Through Solarletter, I hope to provide you with valuable information, market analysis, state-of-the-art updates, and practical tips that will help you stay informed about the latest developments in the photovoltaic industry.
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Alright, let us go with a couple of interesting pieces of news!
Low electricity prices pose a threat to photovoltaics
We begin with an article by Pilar Sánchez Molina in PV-Magazine about the current state of electricity prices in Spain. A couple of weeks ago, photovoltaic generation reached historic levels in Spain, Portugal, and Italy for the month of February. At first glance, these are good news to celebrate, but as renewable generation increases, electricity demand decreases. Bad news. Compared to last year, national demand fell by 2.3%, and by 10.5% when compared to values from 5 years ago. Electricity demand is at levels from 20 years ago.
Both data explain why the average electricity price on February 22 was €10.71/MWh. Javier Revuelta comments that due to the strong penetration of photovoltaics, average prices of €35-40/MWh this spring could imply solar capture prices as low as €10/MWh. He also comments:
"But there comes a point where more solar does not further reduce prices (which will already be at zero) but only pours resources. Before, we thought that profitability issues would start in 2025, but with recent rains and plummeting gas prices, we are going to start this year. March is expected to have periods of wind and solar resources superior to those of February, around 20 GW on sunny days. Considering that the caps in 2023 reached 16 GW, we have excess capacity of 5 GW, which will turn into 10 GW in 2025 and 15 GW in 2026. We already detected about 0.4 GW of photovoltaic curtailment in the daily market from 11 am to 4 pm on February 10, and simultaneously 2-4.5 GW of wind curtailment. We are witnessing the starting shot for prolonged low prices."
In his opinion, Spain should accelerate regulations to incentivize storage and roll out the red carpet for any factory or industry willing to come. One of the problems precisely with the PNIEC is this. The plan envisaged a much faster electrification of the economy than the current pace, increasing at a rate of 5% per year, mainly attracted by the prospect of cheap energy.
We are reaching a point where more renewable does not mean cheaper energy but rather implies higher curtailments and, therefore, opportunity costs. This could jeopardize the entire industry and the jobs created in recent years.
Will there be a collapse of the photovoltaic industry in Spain, as already happened with the end of subsidies after the financial crisis?
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Overparticipation in the latest auction in Germany
We head straight to Germany, where PV Tech reports on the results of the latest auction. Out of the 1.61 GW offered, a total of 5.5 GW were submitted in 124 bids, which is three and a half times more than what was offered.
The average price reached was €0.0517/kWh, decreasing by 1.3 cents compared to the previous auction. The lowest offer was at €0.0444/kWh, while the highest reached €0.0547/kWh.
The German government's strategy to increase auction prices in 2023 has proven successful, as both the December and March auctions for photovoltaic parks ended oversubscribed.
Bavaria led in awarded capacity with 604 MW and 63 bids, followed by Brandenburg with 197 MW and Saxony-Anhalt with 167 MW. The next photovoltaic auction started on March 1, 2024, with 2.2 GW of capacity offered at a maximum value of €0.0737/kWh.
These auctions are part of the German government's strategies to achieve its goal of 215 GW of installed solar capacity by 2030. Although it has not reached that figure yet, Germany added over 14 GW of solar energy capacity last year, an 85% increase compared to the 7.5 GW added in 2022.
In Solarletter #10, we already mentioned how, despite the strong renewable penetration in Germany, it remains a market with robust growth.
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Renewable auction in Colombia awards 4.4 GW to photovoltaics
And we move from auction to auction. This time, we head to Colombia with this LinkedIn article by Serena Qian. In the latest auction that featured all renewable technologies, photovoltaics dominated its counterparts, securing 99% of the offered capacity, totaling 4.4 GW.
The 30 awarded projects are required to be operational between December 1, 2027, and November 30, 2028. The auction concluded with a price of $0.0182/kWh.
Among the successful bidders is Enel Colombia, the Colombian subsidiary of the Italian company Enel, which won bids for six projects with a combined capacity of 1.2 GW, representing a quarter of the awarded photovoltaic solar energy capacity. These projects are in different development stages, and the Fundación photovoltaic park (90 MW) is expected to be operational during the first half of 2024.
Additionally, Enel recently inaugurated the La Loma photovoltaic park with an installed capacity of 187 MW, considered the largest in Colombia.
Another solar developer based in Chile, Verano Energy, also secured a bid for its 270 MW Las Palmeras solar plant in the Colombian auction. With a declining Levelized Cost of Electricity (LCOE), photovoltaic energy has created opportunities for developers in Latin America, including Colombia. This trend is also observed in other Central American markets, such as Guatemala, which has shown interest in solar energy through government tenders and private investments.
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Other manufacturers embarking on the journey to the Americas
In Solarletter #13, we saw how the German module manufacturer Meyer was betting on the U.S. market. The following somber news comes from El periódico de la energía, by Ramón Roca.
At the Revolution Energy Congress organized by the Valencian renewable energy association Avaesen, Lalo Salvo, the Technical Vice President of Power Electronics, declared that the company, a global leader in energy storage and manufacturer of solar inverters, plans to make substantial investments in improving its factory in the United States. Seventy percent of Power Electronics' production is destined for the United States, and the company aims to capitalize on the opportunities presented by the Inflation Reduction Act (IRA) (Solarletter #6).
Salvo criticized the lack of action in Europe compared to China and the United States, where significant support is being provided to renewable energy manufacturers. While Chinese manufacturers receive massive subsidies, the United States has implemented a unique industrial protection plan that requires companies to manufacture locally to sell in the country. Power Electronics plans to follow this approach and increase its presence in the U.S. market.
Another Valencian company, Endurance Motive, a battery manufacturer, is also planning to expand in the Americas with the construction of a new factory in Mexico. Ander Muelas, the President and co-founder of the company, called for more support in Europe to create quality jobs, emphasizing that confidence in the European industry is crucial.
José E. Cervera, Business Development Director of Silicon Valen, a Valencian manufacturer of solar modules, highlighted the need for immediate measures by the European Union to compete with China and the United States in the renewable energy industry. The concern revolves around the prices of Chinese manufacturers.
The clock is ticking, and the push for the European renewable manufacturing industry is yet to materialize. How many more companies must pack their bags for us to realize?
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Edition´s microtip curiosity
Let us delve into an intriguing study from the Universidad de Hohenheim, shared with me (thanks, Panos) via Notebook Check. In this study, they reveal that large photovoltaic parks in dry and sunny regions not only generate electricity but can also have positive effects on the local climate.
The research focused on the Mohammed bin Rashid Al Maktoum Solar Park in the United Arab Emirates. Producing electricity at a cost of around €0.0025/kWh, it currently has a capacity of 2.4 GW, with plans to expand to 5 GW by 2030.
The study employed meteorological models to predict the complex interaction between heat, air, and water. Across a 15 square kilometers surface, roughly the size of the solar park (comprising both photovoltaic and solar thermal technology), it is expected to absorb 95% of solar radiation. This generates convection currents and cloud formation.
With the addition of moisture from the Persian Gulf and winds in upper zones, conditions are created that, in an area three times larger than the solar park, induce 10 millimeters of rainfall. This effect could potentially be replicated in other regions with similar climatic conditions, such as Baja California or the coast of Namibia. Additionally, the study suggests that it can be specifically controlled using solar panels that absorb nearly all light, combining electricity generation with rain cloud formation.
That concludes the edition. I hope you enjoyed and it made your coffee break, public transportation ride, or nap more enjoyable. If you have any suggestions, recommendations, or comments, feel free to reply to this email.
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