Renewable Energy Auctions: Analysing 2016’
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ANALYSING 2016 RENEWABLE ENERGY AUCTIONS ANALYSING 2016 RENEWABLE ENERGY AUCTIONS RENEWABLE ENERGY AUCTIONS ANALYSING 2016 ANALYSING ANALYSING 2016 © IRENA 2017 IRENA HEADQUARTERS P.O. Box 236, Abu Dhabi United Arab Emirates www.irena.org 2017 •1 • RENEWABLE ENERGY AUCTIONS © IRENA 2017 Unless otherwise stated, material in this publication may be freely used, shared, copied, reproduced, printed and/or stored, provided that appropriate acknowledgement is given of IRENA as the source and copyright holder. Material in this publication that is attributed to third parties may be subject to separate terms of use and restrictions, and appropriate permissions from these third parties may need to be secured before any use of such material. This publication should be cited as: IRENA (2017), ‘Renewable Energy Auctions: Analysing 2016’. IRENA, Abu Dhabi. ISBN 978-92-9260-008-2 ABOUT IRENA The International Renewable Energy Agency (IRENA) is an intergovernmental organisation that supports countries in their transition to a sustainable energy future, and serves as the principal platform for international co-operation, a centre of excellence, and a repository of policy, technology, resource and financial knowledge on renewable energy. IRENA promotes the widespread adoption and sustainable use of all forms of renewable energy, including bioenergy, geothermal, hydropower, ocean, solar and wind energy, in the pursuit of sustainable development, energy access, energy security and low-carbon economic growth and prosperity. www.irena.org ACKNOWLEDGEMENTS The report has been developed under the guidance of Rabia Ferroukhi (IRENA) and has been authored by Diala Hawila (IRENA) and Gabriel Cunha and João Pedro Bastos (PSR). The report benefited from the valuable contribution of Miljan Todorovic, Divyam Nagpal, Alvaro Lopez-Peña, Celia García-Baños, Arslan Khalid, Verena Ommer, Laura El-Katiri, Henning Wuester, Salvatore Vinci and Bishal Parajuli (IRENA), Luiz Augusto Barroso (Empresa de Pesquisa Energetica, Brazil), Fabian Wigand (Germany), Wikus Kruger (University of Cape Town), Arina Anisie (PSR), Gus Schellekens and Fazil Abdul Rahiman (Ernst & Young), Hannes Reinisch (PwC), Ignacio Rodriguez (Tetra Tech USA) and Amit Jain (World Bank). DISCLAIMER This publication and the material herein are provided “as is”. All reasonable precautions have been taken by IRENA to verify the reliability of the material in this publication. However, neither IRENA nor any of its officials, agents, data or other third-party content providers provides a warranty of any kind, either expressed or im- plied, and they accept no responsibility or liability for any consequence of use of the publication or material herein. The information contained herein does not necessarily represent the views of the Members of IRENA. The mention of specific companies or certain projects or products does not imply that they are endorsed or rec- ommended by IRENA in preference to others of a similar nature that are not mentioned. The designations em- ployed and the presentation of material herein do not imply the expression of any opinion on the part of IRENA concerning the legal status of any region, country, territory, city or area or of its authorities, or concerning the delimitation of frontiers or boundaries. •2 • ANALYSING 2016 TABLE OF CONTENTS Introduction ............................................................ 8 1 Highlights of renewable energy auctions in 2016 ........................... 10 2 Trends in renewable energy auctions ...................................... 16 2.1 The strengths and weaknesses of auctions ......................................16 2.2 Price trends: Solar PV ........................................................19 2.3 Price trends: Onshore Wind ...................................................27 3 Analysis of factors influencing prices ...................................... 34 3.1 Access to finance and country-specific conditions ...............................34 3.2 Conducive environment for investor confidence .................................36 3.3 Policy support to the renewable energy sector ..................................38 3.4 Design of the auction ........................................................39 4 Country Case Studies ................................................... 44 4.1 Argentina ...................................................................45 4.2 Brazil ..................................................................... 50 4.3 Chile .......................................................................54 4.4 Germany ...................................................................58 4.5 India .......................................................................62 4.6 Mexico .....................................................................68 4.7 Peru .......................................................................73 4.8 United Arab Emirates ........................................................76 4.9 Zambia ....................................................................79 5 Technologies in focus: offshore wind and electricity from bioenergy .......... 84 5.1 Offshore wind .............................................................. 84 5.2 Electricity from bioenergy ....................................................91 6 Key considerations in designing renewable energy auctions ................. 98 References ............................................................ 102 • 3 • RENEWABLE ENERGY AUCTIONS LISTS OF FIGURES, TABLES AND BOXES LIST OF FIGURES Figure 1.1 Countries that have awarded renewables Figure 4.3 Risks and mitigation techniques in auctions in 2016: technology, in Argentina’s RenovAR programme .......49 quantity and price ....................... 10 Figure 4.4 Contracted capacities and average Figure 2.1 Average prices resulting from auctions, prices resulting from the auctions in Brazil, 2010-2016 ...............................16 2008-2016 ...............................51 Figure 2.2 Estimated installation costs of utility-scale Figure 4.5 Contracted capacities and average PV projects: global versus auction prices resulting from the auctions in Chile, winners, 2010-2016 .......................18 2015-2016 ..............................54 Figure 2.3 Evolution of average auction prices Figure 4.6 Contracted capacities and average for solar PV, January 2010-February 2017 ..20 prices resulting from solar auctions in Germany, 2015-2017 ...................58 Figure 2.4 Local content requirements and achievements in South Africa .........22 Figure 4.7 Contracted capacities and average prices resulting from auctions in India, Figure 2.5 The effect of inflation indexing 2010-2017 ..............................64 on contract price ........................23 Figure 4.8 Remuneration profile of an Indian Figure 2.6 India’s actual and adjusted solar prices, auction featuring viability gap funding 2010-2017 ..............................24 with fixed escalation .....................67 Figure 2.7 The United States' actual and adjusted Figure 4.9 Contracted capacities and average solar prices, 2010-2017 ...................25 prices resulting from auctions in Mexico, March and September 2016 ...............70 Figure 2.8 Solar prices in France and Germany: actual and adjusted results assuming Figure 4.10 Contracted capacities and average a capacity factor of 25%, 2010-2017 .......26 prices resulting from auctions in Peru, 2010-2016 ..............................73 Figure 2.9 Evolution of average auction prices for onshore wind energy, Figure 4.11 Contracted capacities and average January 2010-January 2017 ..............27 prices resulting from auctions in the United Arab Emirates, 2015-2017 ....77 Figure 2.10 Economic signals for project location and offered capacity, by location: Figure 5.1 Evolution of average auction prices first and second auctionsº in Mexico, 2016 . 29 for offshore wind, 2010-2017 .............85 Figure 2.11 Price ceilings and contracted capacities Figure 5.2 Illustration of contract in the first and second auctions in Mexico ..29 for difference payments ..................89 Figure 2.12 Wind auction results in Brazil, 2009-2016 ..............................31 Figure 3.1 Estimated evolution of capital costs of projects winning solar PV auctions and range of country averages (shaded), 2010-2016 ..............................35 Figure 3.2 Categories of auction design elements ....40 Figure 3.3 Abu Dhabi’s solar auction: Bid submitted vs. actual remuneration. 43 Figure 4.1 Liquidity guarantee in Argentina’s RenovAR programme ....................47 Figure 4.2 Solvency/termination guarantee in Argentina’s RenovAR programme .......48 • 4 • ANALYSING 2016 LIST OF TABLES LIST OF BOXES Table 2.1 Summary of results of the first auction Box i IRENA’s ongoing work on auctions .........9 round in Mexico, March 2016. .30 Box 2.1 Strengths of renewable energy auctions ....17 Table 3.1 Renewable energy policies and measures ..38 Box 2.2 Dealing with underbidding in economic Table 4.1 Summary of results of RenovAR downturn in Brazil: auction to auctions in Argentina ....................45 "de-contract" renewables .................19 Table 4.2 The auction design elements that impact Box 2.3 Local content in South African auctions ....22 the price in Argentina ....................49 Box 2.4 Remuneration profile in Indian auctions ....23 Table 4.3 Results of Brazilian biomass auctions, 2013-2015 ..............................52 Box 3.1 Access to finance and the economic situation in