The large deployment of photovoltaic and renewable capacity in general that is expected for the next decade puts on the table a key issue for the development and success of the photovoltaic sector, such as project financing, says AleaSoft Energy Forecasting.
Antonio Delgado speaking at GENERA - Courtesy of AleaSoft
The Spanish Photovoltaic Union (UNEF) organised a workshop “The Financing of the photovoltaic projects” at the recent GENERA fair (5th to 7th February) to discuss this issue. AleaSoft participated in the workshop by contributing its vision of the future of the electricity market and the use of the price forecasts for the long term planning of photovoltaic projects.
The workshop took place within the framework of the Energy and Environment International Trade Fair GENERA 2020, which this year was held in Madrid with the slogan “Integrating energies for a sustainable future”.
According to data from Red Eléctrica de España (REE), during the past year 4 GW of photovoltaic capacity was installed in Spain, an increase of 89 percent on the record 2.6 GW installed in 2008. Virtually all of the 4 GW was installed in just six months.
The workshop at GENERA focused on the challenges and strategies facing the necessary financing for new solar photovoltaic generation plants, including merchant or PPA options, risk coverage and insurance contracting. Antonio Delgado Rigal, CEO of AleaSoft, participated in the workshop with his presentation “Electricity market prices forecasts for the calculation and optimisation of income”. In his exposition, Antonio explained AleaSoft's vision of the future of the electricity markets in Europe and the Iberian market in particular.
The challenges facing the European energy market, with the imminent increase in production with renewable sources to achieve the targets of reduction of CO2 emissions set out in the National Energy and Climate Plans (NECP), are significant. In the latest draft of the Plan that the Spanish government sent to the European Union, it aims to reach 39 GW of solar photovoltaic capacity in 2030. That is 31 GW of photovoltaic capacity to be installed in ten years, in addition to the 25 GW of wind capacity and the 5 GW of solar thermal capacity.
These numbers have provoked a great many doubts and questions, such as whether the energy system will be able to absorb all the renewable energy production, or will the marginal market system faced with so much production with such low opportunity costs be functional?
AleaSoft says that the market has so far been able to self regulate and to adapt to all changes (changes in the production mix, regulatory changes, tax changes, etc.) and will continue to adapt with the increase in renewable energy production. According to AleaSoft, the key is in the response that the electricity demand will have in the face of this increase in renewable energy. The decarbonisation targets of the entire economy will force the massive electrification of the industrial, transport and air conditioning sectors. This will be the increase in demand necessary to maintain the market balance.
On the other hand, in those sectors where electrification is not efficient (industrial heat, heavy and long distance transport, etc.), the transition to fuels with zero polluting emissions must be made, and in that area, according to AleaSoft, hydrogen will be the major factor. This hydrogen will have to be produced from renewable sources so that its complete cycle is entirely without emissions and therefore its production will contribute to the increase in demand for green electricity.
Hydrogen is currently considered the best medium term energy storage option. Although batteries are considered as the best option to store the necessary demand for several hours, in view of the seasonal storage of large amounts of electricity, hydrogen is postulated as the best candidate.
This vision of the future of the market and the price forecasts are essential for the decision making in the medium and long term, from the planning of a photovoltaic project to the design and execution of a strategy for the risk management of market prices.