Renewables reduce the price of energy and this necessarily has a positive effect on consumers’ pockets. In this sense, the more clean sources in the generation mix, the lower the price of electricity will be. This is good for households and businesses, but it brings with it a problem for project developers, especially for solar photovoltaic projects, because for each megawatt hour generated, it is the technology that generates the least income.
When there is a lot of photovoltaic production, energy is cheap. Photovoltaics is thus making the industry more competitive and citizens paying less for energy. But, due to the focus that photovoltaics has, this technology is charging lower prices for producing electricity than other more expensive and polluting ones, such as combined cycles – it should be noted that gas plants bear higher costs. The reason is that, during the hours when there is no solar radiation and, therefore, no photovoltaic energy, other sources with much greater volume enter the market that mark, and charge, higher prices.
The photovoltaic targeting refers to the relationship between the average price of the electricity market and the average price of photovoltaic energy during a specific period of time. Thus, it is an essential indicator to evaluate the convenience of selling the electricity generated by solar panels at specific times of the day. According to data from the Spanish Photovoltaic Union (UNEF), the captured price of photovoltaics is 34% lower than the daily market price so far this year, since when it enters the market the price drops very sharply and when it is not there it shoots up. Again, photovoltaics lowers the price of electricity for citizens and industry, but it is the technology that is charging the least for the electricity it provides to the system.
What is the formula to increase income?
In this way, under a scenario of very cheap electricity prices during solar hours, what is the solution to make projects profitable while reducing the final consumer’s bill? Storage. From the photovoltaic association, which has a representation of more than 800 companies – approximately 90% of the activity of the sector in Spain – they argue that the ideal model would have to find the balance between setting a cheap price for companies and citizens thanks to photovoltaics but, at the same time, that it is sufficiently attractive to guarantee the continuity of investments in new installations. “We have to go towards formulas that pay the right amount for photovoltaic technology without penalizing the citizen and, for this, storage is fundamental, since its promotion will allow us to give stability to prices, smoothing out those large peaks that we have now,” says the general director of UNEF, José Donoso, in conversation with La Información Económica.
In this sense, when prices are low, energy is purchased to be stored in batteries and sold later at more expensive times, thus ensuring greater profitability. In addition, the more storage there is in the system, the more targeting there will be. Donoso also supports auctions without exposure to the market. In his opinion, this measure would guarantee the photovoltaic industry sufficient profitability and the citizen who will pay a more stable price, without the peaks that exist now. However, UNEF does not want to fall into alarmism either. “Although revenues are falling and this puts profitability at risk, costs are also plummeting, so many photovoltaic projects will still be viable, which, despite having much lower revenues, have also achieved very low costs and, therefore, remain profitable. The costs of this technology have not stopped falling and now photovoltaic panels can cost as little as 0.10 dollars/W, well below the 0.75 dollars/W of 2014 or the 4.53 dollars/W of 2004,” says the technical director of the association, Héctor de Lama.
How to promote storage?
UNEF is working on an alternative to promote storage in Spain, which is causing so many headaches due to the lack of a regulatory framework that hits the mark. Part of the sector is calling for the implementation of capacity mechanisms to achieve a strong deployment of batteries, but the association also proposes that the installations that participate in the next auctions of the The Economic Regime of Renewable Energies (REER) must include storage. To refer to these auctions, REER with Storage uses the acronym REERcA.
He believes that this is a way for hybrid generation facilities with batteries to internalise the risk that storage cannot obtain a sufficient return in the markets in which it operates to cover costs and be profitable. Thus, in exchange for slightly more expensive generation to compensate, additional storage can be incorporated, which allows reducing waste, adding more renewables to the system and reducing the participation of fossil technologies in those hours with less renewable generation.
