Portuguese government confirms world record solar price of $0.01316/kWh

[Jay McKinsey + 1,489]

In a press release, it said that 670 MW of power generation capacity was allocated, of which 483 MW went to PV projects linked to storage, while the remaining 177 MW and 10 MW were assigned for projects under the “system compensation” remuneration option and the “contract for difference” regime, respectively. 

It also confirmed that the auction drew the world’s lowest bid for a large-scale PV project at €0.01114 ($0.01316)/kWh, which is slightly lower than the price of €0.0112 revealed by Portuguese financial newspaper during the first day of the procurement exercise, and still lower than the $0.0135/kWh bid submitted by French energy group EDF and China’s JinkoPower in a 2 GW tender held in Abu Dhabi, https://www.pv-magazine.com/2020/08/27/portuguese-government-confirms-world-record-solar-price-of-0-01316-kwh/

[markslawson + 1,042]

8 hours ago, Jay McKinsey said:

It also confirmed that the auction drew the world’s lowest bid for a large-scale PV project at €0.01114 ($0.01316)/kWh, which is slightly lower than the price of €0.0112 revealed by Portuguese financial newspaper during the first day of the procurement exercise,

Okay - of course that must mean Portuguese power prices are lower than anywhere else. Not a bit of it. Portugal's domestic power prices are fourth in Europe ranking behind Germany (which is even bigger on renewable energy and where power prices are notoriously high), Belgium and Italy and just above Spain which has been trying to wind back its vast subsidies for renewables, and is also known for high power prices. There is no correlation between high level of renewables on a grid and lower power prices, but plenty of evidence that the reverse is true. Given all that, why is the bid so low? You will find that its an artifact of an interaction between the subsidy and auction systems set up by the government. The true cost would be completely different and, as always, the consumer has to pay. 

[Jay McKinsey + 1,489]

3 minutes ago, markslawson said:

Okay - of course that must mean Portuguese power prices are lower than anywhere else. Not a bit of it. Portugal's domestic power prices are fourth in Europe ranking behind Germany (which is even bigger on renewable energy and where power prices are notoriously high), Belgium and Italy and just above Spain which has been trying to wind back its vast subsidies for renewables, and is also known for high power prices. There is no correlation between high level of renewables on a grid and lower power prices, but plenty of evidence that the reverse is true. Given all that, why is the bid so low? You will find that its an artifact of an interaction between the subsidy and auction systems set up by the government. The true cost would be completely different and, as always, the consumer has to pay. 

These low cost bids are for future additions. They do not exist yet thus they do not help drive down the cost of electricity, yet.

The cost of electricity in Portugal peaked in 2016 and is now slowly decreasing but that decrease will speed up as these new projects come online. Initial investments in renewable were expensive and carried by early adopters. But those investments drove down costs and from here forward the cost of electricity begins to decrease.

Cheaper electricity bills in Portugal in 2020: Lower energy prices

The electricity bill is one of the most costly charges for households in Portugal, but the good news is that the amount to be paid will fall for the third consecutive year. 

https://www.idealista.pt/en/news/financial-advice-portugal/2019/12/02/469-cheaper-electricity-bills-portugal-2020-lower-energy

[markslawson + 1,042]

22 hours ago, Jay McKinsey said:

These low cost bids are for future additions. They do not exist yet thus they do not help drive down the cost of electricity, yet.

The cost of electricity in Portugal peaked in 2016 and is now slowly decreasing

Come now Jay, how often have we done this dance.. go back and look at the article you cite and then do some homework. Its a regulated market, the declines are off a peak and the bidding price has nothing to do with the actual cost of providing electricity. As noted in earlier posts the failure to invest in conventional generation over renewables has had catastrophic, costly effect in California. You should make an effort to understand what is happening around you.

As for the prices cited the fact that they are so low should be cause for considerable skepticism. What's going on? In searching around I found this statement in the documentation ... 

For Solar Power Plants with storage, option “General remuneration flexibility option”, the winning bidder

will receive the compensation set in the tender, in €/MW/year, while providing an insurance against price

spikes in the wholesale electricity market, meaning that when wholesale prices rises above the strike

price, as set in the Procedure Program, the winning bidder must return the difference to the National

Electrical System..

 

Note that the strike price is not the tender price, its a different figure altogether. So the bidder is guaranteed the tender price but can earn up to the strike price. The bidders are, in fact, betting that wholesale prices will be much closer to the strike price. After some digging I found that the strike price is some sort of average of the market price over a period. Now the bids make sense. They are about getting a slice of the market. Green energy remains very, very expensive. Leave it with you.  

  

[Meredith Poor + 883]

0.01316 per Kwh / 1000 watts = 0.00001316 per watt-hour.
0.00001316 * 5 hours per day * 365.25 days per year * 25 years = $0.60083625 per watt.

Essentially, the 1.3 cents per Kwh equals an installed cost of 60 cents per watt, assuming a 25 year lifespan.

[Keith boyd + 178]

Yeah but....oil was negative $30 a barrel.

Beat that. 

[Wombat + 1,028]

On 8/29/2020 at 11:03 AM, markslawson said:

Come now Jay, how often have we done this dance.. go back and look at the article you cite and then do some homework. Its a regulated market, the declines are off a peak and the bidding price has nothing to do with the actual cost of providing electricity. As noted in earlier posts the failure to invest in conventional generation over renewables has had catastrophic, costly effect in California. You should make an effort to understand what is happening around you.

As for the prices cited the fact that they are so low should be cause for considerable skepticism. What's going on? In searching around I found this statement in the documentation ... 

For Solar Power Plants with storage, option “General remuneration flexibility option”, the winning bidder

will receive the compensation set in the tender, in €/MW/year, while providing an insurance against price

spikes in the wholesale electricity market, meaning that when wholesale prices rises above the strike

price, as set in the Procedure Program, the winning bidder must return the difference to the National

Electrical System..

 

Note that the strike price is not the tender price, its a different figure altogether. So the bidder is guaranteed the tender price but can earn up to the strike price. The bidders are, in fact, betting that wholesale prices will be much closer to the strike price. After some digging I found that the strike price is some sort of average of the market price over a period. Now the bids make sense. They are about getting a slice of the market. Green energy remains very, very expensive. Leave it with you.  

  

It is not as simple as that Mark, gas "peaker" plants are even more expensive than battery storage.

[Meredith Poor + 883]

A 'standard' barrel of oil represents 5,800,000 BTUs of energy

A BTU is equivalent to 0.293071 watt-hours, so a barrel of oil is equivalent to 1699811.8 watt-hours.

A watt of photovoltaic power would produce, at least in theory, 5 * 365.25 * 25 watts of output over 25 years, or 45656.25 watt-hours.

1699811.8 / 45656.25 = 37.2306486 watts, so in theory 37.25 watts of solar power operating 25 years generates the BTU equivalent of a barrel of oil.

37.25 * .60 = $22.34. If one could convert the thermal potential of oil to electrical potential of solar, the barrel would be worth $22.34.

However, if burning oil to generate electricity is only 35% efficient, the barrel is only worth $7.82.

This is what oil is competing with today. Anyone want to guess what this will look like in 2030?

 

[markslawson + 1,042]

20 hours ago, Wombat said:

It is not as simple as that Mark, gas "peaker" plants are even more expensive than battery storage

Wombat - you don't seem to understand the point being made. The original point was that the renewable power plants were lobbying ultra-low supply tenders. As I noted the actual supply price has little to do with the guaranteed minimum price - the bid price being quoted. I made no attempt to compare gas plant bids, so your comment simply isn't relevant.   

[ronwagn + 6,290]

9 hours ago, Meredith Poor said:

A 'standard' barrel of oil represents 5,800,000 BTUs of energy

A BTU is equivalent to 0.293071 watt-hours, so a barrel of oil is equivalent to 1699811.8 watt-hours.

A watt of photovoltaic power would produce, at least in theory, 5 * 365.25 * 25 watts of output over 25 years, or 45656.25 watt-hours.

1699811.8 / 45656.25 = 37.2306486 watts, so in theory 37.25 watts of solar power operating 25 years generates the BTU equivalent of a barrel of oil.

37.25 * .60 = $22.34. If one could convert the thermal potential of oil to electrical potential of solar, the barrel would be worth $22.34.

However, if burning oil to generate electricity is only 35% efficient, the barrel is only worth $7.82.

This is what oil is competing with today. Anyone want to guess what this will look like in 2030?

 

Shouldn't you be adding in the cost of the needed battery or other backup to provide the wind or solar energy when needed? 

[Meredith Poor + 883]

6 minutes ago, ronwagn said:

Shouldn't you be adding in the cost of the needed battery or other backup to provide the wind or solar energy when needed? 

With respect to cars, no, since those batteries are part of the price of the car.

For utility RE, yes. I'm seeing sea changes in storage technology, so I have to absorb some of this before I run out a batch of numbers.

[Monk + 14]

The 2020 Portugal auction itself has three different bidding categories. 

On 8/27/2020 at 9:46 AM, Jay McKinsey said:

In a press release, it said that 670 MW of power generation capacity was allocated, of which 483 MW went to PV projects linked to storage, 

This is a much bigger takeaway than the pure solar play that gets the press attention for the following reasons.

1) There is very limited availability access to transmission and distribution substations for generators and is being auctioned to produce electricity with PV+20% Storage of at least 1 hour duration  resulting in the 483 MW of pV with a minimum of nearly 100MW/100MWH 

2) It is expected the the Portuguese Electricity System ( SEN) will pay capacity payments to the bidders like all other current generators of about €33,500/MW per year instead they are paying the operator a capacity premium  of around €37,100/MW per year for 15 years. 

3) They will also pay to grid system the difference between peak and strike price for the first 15 years

4) Any storage can also free to participate in energy arbitrage by time shifting and ancillary service markets 

 

Yes, everybody expected  that the system needs to pay for storage with capacity payments  but in a stunning result are paying the system capacity payments to compete on the market 

1) This will accelerate storage deployment in Portugal 

2) This result will likely accelerate similar auctions of more PV/Storage auctions in Spain and Italy

3) Will accelerate reform of Imbalance market in Portugal

 

PS: (for those short on understanding of wholesale electricity markets)  

1) This doesn't mean batteries have better economics than NG/Coal/Nuclear running all the time - that would be gross error.

2) This likely  means batteries have better economics than Gas plants  which run for less than 2-4 hours per day or about a capacity factor less than 20%. (See below for capacity factor based costs of NG plants)

3) In summer peaking regions when paired with PV, PV+Storage will likely replace most peaker plants in that region.

4) In an electrical markets, typically peaker plants can be upto 25% of the capacity system when including the reserves 

5) With current and near future economics of the batteries, all those peaker plants  now have a fierce competitor in batteries and the peaker plants are likely on the way of coal atleast in non winter peaking regions

6) Also this doesn't mean there will be any substantial change in bulk Natural Gas demand even if batteries replace most of the peakers because of the low capacity factors involved. 

 

On 8/27/2020 at 9:46 AM, Jay McKinsey said:

It also confirmed that the auction drew the world’s lowest bid for a large-scale PV project at €0.01114 ($0.01316)/kWh, 

1) The grid access to transmission and distribution substations is constrained and is being auctioned

2) The auction is for 15 years and after that market prices permanently and a permanent grid connection to sell electricity at market prices after 15years

3) The auction clearly is very beneficial to grid operators/customers and they expect to make money from the market after the 15 years - clearly a bet that they will be substantially cheaper than market after 15 years   (which can include gas, coal, solar, wind or whatever) with forward looking PV construction and operating costs. 

what can be concluded:

1) In Portugal/Spain electricity markets PV will be compete with other resources on the market and is essentially paying money to compete

2) the financial models for PV plants are now extending to 30 or 35 years of lifetime and the Portugal market auction investors expect the larger cash flows after 15 years compared to the first 15  to be able to pay back their debts and costs and produce some returns

What can't be concluded from the auction price:

- That the bid price is a reflection of current construction and operating costs.

- How much will it cost the investors for the first 15 years and much they will earn from 15 years to 30+/50 years?

The Portugal 2020 auction winners in different categories: 

 

 

 

A rough guide for Natural gas levelized costs based on capacity factors. (Note: Individual plant costs will vary based on markets) 

For rough reference: 4 hour Battery Storage  levelized cost in 2020 is about 16.5 cents per KWH

 

[Wombat + 1,028]

7 hours ago, ronwagn said:

Shouldn't you be adding in the cost of the needed battery or other backup to provide the wind or solar energy when needed? 

Not really, the batteries and backup are only temporary necessities. Once there is an "over-build" of renewables to the tune of 250% say, and approx half the electricity is used to make green H2, there will be little need for batteries or FF backup. It will be a case of simply switching off the H2 production on the few days per year that weather conditions are at their most extreme.

[ronwagn + 6,290]

I like to see real world proven figures over time, not just claims. I hope your ideas pan out if we must be stuck with wind turbines everywhere. Total and final real costs to the consumers with reasonable environmental goals long term are what is important to me. 

[ronwagn + 6,290]

Why is it that wind turbines are not first placed over the horizon in places lie our coasts, The Great Lakes, etc. People hate looking at them all over. Build them as large as you like. They will make great fish habitat when you replace them.

[Meredith Poor + 883]

5 hours ago, ronwagn said:

 They will make great fish habitat when you replace them.

Off shore pylons make great fish habitat. A tagged seal was observed swimming in a pattern that took it from one offshore piling to another, for a distance of several miles, implying some sort of foraging.

[NickW + 2,714]

10 hours ago, ronwagn said:

Why is it that wind turbines are not first placed over the horizon in places lie our coasts, The Great Lakes, etc. People hate looking at them all over. Build them as large as you like. They will make great fish habitat when you replace them.

Because building turbines on land is easier and small smaller turbines are not viable offshore. The development path  necessitated onshore first.

The offshore foundations are designed for 2-3 generations of turbine so will be used for the next 60-100 years. This will further lower costs further down the line as wind turbine development costs are  front end loaded. 

[NickW + 2,714]

5 hours ago, Meredith Poor said:

Off shore pylons make great fish habitat. A tagged seal was observed swimming in a pattern that took it from one offshore piling to another, for a distance of several miles, implying some sort of foraging.

I'm sure someone on her claimed fish can't breed around offshore wind farms 🙄

[footeab@yahoo.com + 2,129]

47 minutes ago, NickW said:

The offshore foundations are designed for 2-3 generations of turbine so will be used for the next 60-100 years.

Uh... Good luck.  I won't hold my breath.  Is it possible?  Yes.  IF they go with concrete and fiberglass or SS rebar.  Not possible if they use straight steel, unless it is SUPER thick... as in Battlecruiser thick.  Lets put it this way, your cargo ships use ~1cm thick steel for their hulls and they are painted carefully and repainted with inspections constantly happening and said steel is still destroyed by the saltwater in ~25 years maximum.  Big warships can last longer because their thicker steel thickness and can withstand more corrosion.  Big oil platforms have lasted at the extreme end??? 40 years?  The oldest are concrete aren't they? 

Last I checked those offshore boys were using steel...  Guess they know something we don't.  No way in Hell will the turbines be replaced and if they are, the whole thing will be scrapped or at best towed back and heavily refurbished. 

[Dan Warnick + 6,100]

1 hour ago, NickW said:

I'm sure someone on her claimed fish can't breed around offshore wind farms 🙄

Is that right?  I've got to go tell the guys on the other forum that fish can't breed around offshore wind farms.  Thanks for that info!

[Rasmus Jorgensen + 1,169]

1 hour ago, footeab@yahoo.com said:

Big oil platforms have lasted at the extreme end??? 40 years?  The oldest are concrete aren't they? 

there are several oilplatforms built from steel that are 40+ years old. Really the only reason for decommissiong is because the oil flow slower so more money is needed to keep the oil flowing.... 

[Rasmus Jorgensen + 1,169]

2 hours ago, NickW said:

The offshore foundations are designed for 2-3 generations of turbine so will be used for the next 60-100 years. This will further lower costs further down the line as wind turbine development costs are  front end loaded. 

true to an extent, but there will be a limit because the foundations are dimensioned for a certain size turbine; If turbines keep growing as they are expected then that will require newer foundations as well. 

[NickW + 2,714]

31 minutes ago, Rasmus Jorgensen said:

true to an extent, but there will be a limit because the foundations are dimensioned for a certain size turbine; If turbines keep growing as they are expected then that will require newer foundations as well. 

Yes but if the foundations are in place it maybe more cost effective to deploy a same size turbine 2nd gen turbine than go for a larger turbine which requires a new foundation. 

The market is expanding massively so there will be room for both 2nd Gen redeployments and new larger turbines. 

[NickW + 2,714]

2 hours ago, Dan Warnick said:

Is that right?  I've got to go tell the guys on the other forum that fish can't breed around offshore wind farms.  Thanks for that info!

A mate of mine got to go diving inside a UK offshore farm last spring and it was a fish orgy (Herring and sprats probably)  - water full of eggs and S***k - couldn't see a thing!

Edited September 4, 2020 by NickW

[NickW + 2,714]

3 hours ago, footeab@yahoo.com said:

Uh... Good luck.  I won't hold my breath.  Is it possible?  Yes.  IF they go with concrete and fiberglass or SS rebar.  Not possible if they use straight steel, unless it is SUPER thick... as in Battlecruiser thick.  Lets put it this way, your cargo ships use ~1cm thick steel for their hulls and they are painted carefully and repainted with inspections constantly happening and said steel is still destroyed by the saltwater in ~25 years maximum.  Big warships can last longer because their thicker steel thickness and can withstand more corrosion.  Big oil platforms have lasted at the extreme end??? 40 years?  The oldest are concrete aren't they? 

Last I checked those offshore boys were using steel...  Guess they know something we don't.  No way in Hell will the turbines be replaced and if they are, the whole thing will be scrapped or at best towed back and heavily refurbished. 

You may well be right. What worries me is a lot of this steel jacket / foundation work is contracted out to cowboys in the UAE and Turkey etc.

A bloke I know is a welding inspector and his entire workload now is putting right botch jobs done by welders who appear to have learnt welding from a 1 hour Youtube Video