31.03.2020

Practice Areas: Public and Environment

The next portuguese PV auction in 2020

Last Friday, 27.03.2020, the Secretary of State for Energy of Portugal announced a new PV auction in 2020.

Despite the constraints caused by the current COVID-19 pandemic, it was announced that this auction will be held as soon as the health crisis is over and there is some stabilization in the markets.

Lessons learned from the previous auction, the Secretary of State announced the creation of a licensing task force, under the coordination of the Ministry of Environment and Climate Action. It was highlighted that said creation aimed to ensure that the various licensing authorities involved in the projects awarded in 2019 will proceed as quickly as possible so the promoters are not prevented from meeting the deadlines to which they have committed due to reasons or factors beyond their control.

1. OVERVIEW

The 2020 auction will be similar to the previous one, without prejudice to some adjustments that resulted from the requests for clarification and the suggestions of the bidders and candidates during the 2019’s auction.

It has been announced that the auction will cover 700 MW/MVA of solar capacity, with the lots fully located in the Alentejo and Algarve regions.
The minimum bidding capacity per lot will be 10 MW for HV/MV points and 50MW for VHV points; companies in the same group of companies may not exceed 50% of the capacity. The procedure shall be carried out in the electronic platform available at https://leiloes-renovaveis.gov.pt/.

2. REMUNERATION SCHEME

There are still two remuneration schemes available: (i) guaranteed remuneration (Feed-in Tariff scheme) and (ii) general remuneration.

However, if the operator chooses the general remuneration he will have available two sub-models to also choose from, depending on whether or not his power plant is equipped with a storage system.

Feed-in Tariff scheme
• Bidding is made by offering a discount at the reference tariff fixed on the auction documents;
• This scheme does not allow the transaction of guarantees of origin, although both its issuance and respective payment are mandatory;
• The operator must enter into a contract for the purchase and sale of energy with the last resort supplier (CUR), to whom he shall sell all the energy produced and receive the awarded tariff as remuneration.

General remuneration without storage
• Bidding is made by offering a contribution to the National Electric System (SEN), expressed in EUR/MWh;
• This scheme allows the transaction of guarantees of origin;
• The operator may sell the energy produced in organized markets (MIBEL) at the market price; the possibility of bilateral contracts has not yet been revealed;
• The operator must pay the awarded contribution to the SEN.

General remuneration with storage
• Bidding is made by offering a discount, in percentage, to the reference price fixed in the auction documents and expressed in EUR/MW/year;
• This scheme allows the transaction of guarantees of origin;
• The operator may sell the energy produced in organized markets (MIBEL) at the market price; the possibility of bilateral contracts has not yet been revealed;
• The operator receives the capacity price offered in the bidding;
• The operator must:
o subscribe an insurance policy on price peaks in MIBEL;
o enter into a contract on capacity availability with REN;
• The operator shall guarantee:
o minimum storage capacity corresponding to energy of at least 1h at the nominal power of the converter of the storage system;
o minimum power of 20% of the connection power.

In any of the remuneration schemes the operators:
• shall have the possibility to access the market for system services;
• are subject to the payment of deviations, tariffs, failure to comply with dispatch orders, etc.

3. PROCEDURE

The procedure shall be divided into three parts: qualification, auction and award.

All bids, irrespective of the remuneration scheme, will be subject to conversion according to a mathematical model for purpose of comparability and grading of the offers.

In order to participate in the auction it will be necessary to provide a deposit of EUR 10,000/MW required; after the award, a deposit of EUR 60,000/MW awarded must be provided.

It should be recalled that the capacity reservation title and the production license are non-transferable in any way from the date of their issuance until the issuance of the operation license. However, immediately after the awarding and right before the issuance of said title, a SPV (special purpose vehicle) may be incorporated.

4. POST-AWARDING PHASE

Operators who have had their tender awarded shall comply with a strict scheduling that, if not complied with, shall trigger a progressive loss of the deposit (guarantee) lodged after the awarding. Please note that all deadlines set below count from the issuance of the capacity reservation title:
a) Presentation of the title of use of the land for the installation of the power plant (6 months): failure to meet this deadline results in the loss of 25% of the deposit. The titles accepted in this regard range from the property title to the promissory contract of purchase and sale, provided it has erga omnes (eficácia real) effectiveness. In this case, the operator undertakes to deliver the final contract with the application for the production license;
b) Application for the production license (1 year): failure to meet this deadline results in the loss of 25% of the deposit;
c) Application for a building permit to the municipal council (18 months, if the installation is not subject to an environmental impact assessment or environmental incidences assessment / 24 months, if the installation is subject to said environmental procedures): failure to meet this deadline results in the loss of 15% of the deposit;
d) Application for the operation license (30 months, if the installation is not subject to an environmental impact assessment or environmental incidences assessment / 36 months, if the installation is subject to said environmental procedures): failure to meet this deadline results in the loss of 5% of the deposit.

Although the auction for 2020 was already announced and its main features were already outlined, some changes may occur and one will only know in absolute certainty when the tender documents are published.

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