Storage to compete with solar in next Portugal tender

Power storage systems will need to compete with solar photovoltaic (PV) projects in Portugal's next renewable auction, the launch date of which will only be specified after the coronavirus situation improves, a top government official said today.

"The bidding phase will have to wait for markets to calm down and for our situation to improve," Portuguese energy secretary Joao Galamba said in a presentation about this year's tender.

A total of 700MW of grid injection capacity will be auctioned under three different revenue schemes, valid for 15 years. Like last year's 1.4GW tender, solar PV firms will be able to bid either for a fixed tariff or for the payment of a contribution value to the electricity system in exchange for merchant prices.

But the next auction will also allow bids from merchant solar plants with storage systems, including combinations such as solar PV plus battery, solar PV plus concentrated solar power (CSP), or pure CSP projects. In that case, firms will bid for an annualised capacity payment in €/MW. Bids will be made as a discount to reference capacity payments yet to be set.

Winners under the storage system category would have a separate one-way contract for difference (CfD) with Portugal's power system operator REN, which would benefit from the arrangement by reducing its exposure to system price spikes.

Under the CfD, when wholesale power prices rise above a strike price, winners will need to return the difference to REN. The strike price will be defined quarterly as a variable cost of a combined-cycle gas turbine plant.

Bids from the two other categories will be converted to €/MW to enable comparison with the storage option.

"These storage projects will or will not be realised to the extent that they are competitive against the two existing options," Galamba said today. "We are only creating the conditions for them to compete — but if storage still has a high value for the system, only projects in the other categories will win."

Auction lots will be located in the Alentejo and Algarve regions, and will have sizes between 10MW and 100MW. Specific locations and capacities are yet to be disclosed.

Irrespective of the category, all winners will need to bear the costs of the issuance of guarantees of origin (GOO), which are being launched in Portugal.

But while merchant winners will be entitled to the GOO revenues, winners under the fixed tariff modality will not receive such proceeds, which will instead be passed on to the electricity system.

By Juan Weik