Renewables warn they are facing a production stop

The Association of Renewable Energy Companies, APPA Renovables, warned this Wednesday that the Royal Decree approved by the Government to lower the price of electricity, with its current wording, could cause the paralysis of those facilities with price coverage and private contracts of purchase and sale of energy.

Thus, they assure that “upon the entry into force of Royal Decree-Law 17/2021, hundreds of plants in Spain will be forced to sell with significant losses, to denounce the contracts and even to paralyze their production during the period of validity of the norm “, alerts the Association through a statement.

As an example, APPA points out that there will be the paradox that a project that has gone to market with coverage to minimize its risks, lose money (more than 100 euros) with each MWh dumped into the network. In this sense, APPA has denounced that this not only generates a serious implicit retroactive effect on signed contracts that would lead to judicialization of the sector, but also to the paralysis, for the duration of these measures, of numerous renewable facilities throughout the Spanish geography.

“This stoppage of renewable projects, which would be carried out so as not to have to incur significant losses, would entail a lower supply and, therefore, a foreseeable additional rise in the pool power as a direct consequence “, has advanced the Association.

In addition, in the case of paralyzing or collapsing certain projects, this could directly affect the banking sector, having an impact on the entities that have financed said projects.

From the sector it is understood that this effect “was not the one sought by the Government”, which has made a significant effort in recent years to accelerate the transition to a lower carbon economy, with a greater presence of renewables and with lower energy costs. thanks to the competitiveness achieved by clean energy.

For this reason, APPA Renovables demands the processing of the norm as a Bill in the courts to be able to modify the most harmful aspects for the projects and safeguard legal security, fundamental for obtaining the more than 100,000 million euros in investments. necessary to undertake the Energy Transition.

Impact on PPAs

Additionally, the Association of Renewable Energy Companies shows its deep concern about the link of the reduction in income to the gas market and, in particular, to Mibgas, a market with little liquidity, very volatile and with prices currently on the rise, which makes the behavior of the electricity market even more unpredictable.

The impact that the regulation will have on numerous wind and photovoltaic projects with price hedges and power purchase contracts (PPAs) will make the owners or counterparties of the contract lose money with each MWh injected into the grid, he warned.

In a typical case, the affected renewable installations will have to sell at a loss (for reductions that can exceed 100 euros / MWh), which could lead the owners to make the decision to temporarily stop their activity or denounce the contracts, something that could further increase the price of pool.

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