Webinar ACENEL/AFRY 09.02.2023 - Qué esperar del mercado eléctrico español en el medio plazo

Javier Revuelta, Senior Principal de AFRY, empresa de consultoría e ingeniería y Javier Colón, Presidente de ACENEL, Asociación de Comercializadores Independientes de Energía Eléctrica, te invitan a compartir su análisis sobre qué podemos esperar del mercado eléctrico en España en los siguientes años y qué proyecciones manejan, según la evolución de la cotización del gas natural, derechos de la emisión de CO2 y resto de drivers, así como qué podremos esperar de la política energética nacional y la comparación con el resto de países de nuestro entorno.

Porque el futuro no lo podemos conocer, pero sí que podemos imaginarnos distintas posibilidades.

Transcript

1. Webinar Qué esperar del mercado eléctrico español en el medio plazo 09-02-2023
2. El mercado eléctrico español a medio plazo Webinar ACENEL 9 DE FEBRERO DE 2023
3. 1. Commodity prices 2. Capacity mix 3. Regulation 4. Pool vs. PPA 3 09-02-2023 | COPYRIGHT AFRY | EL MERCADO ELÉCTRICO ESPAÑOL A MEDIO PLAZO Agenda
4. Europe is highly dependent on pipeline imports with Russia as the main supplier. Spain faces a different scenario due to its oversized gas system GAS – EUROPEAN GAS IMPORT MIX SPANISH GAS IMPORT MIX EVOLUTION (BCM) EUROPEAN GAS IMPORT MIX EVOLUTION (BCM) Note: European Domestic Production not included; Europe stands for EU-27 + UK Sources: BP Statistical Review of World Energy; Enagas Informe del Sistema Gasista; Bruegel; AFRY Management Consulting 50 45 40 35 30 25 20 15 10 5 0 201 3 201 9 201 2 201 4 201 5 201 6 201 8 201 7 202 0 202 1 202 2 LNG - US LNG - Russia LNG - Others NG - N.Af+FR+PT Spain has a highly diversified supply mix derived from its high import capacity (~90bcm: 75% LNG, 10% Algerian pipe, 15% FR & PT pipe) compared to our demand ~40bcm Europe imports have traditionally been made by pipe (~70%) with Russia as the main supplier. This has led to a lack of regasification infrastructure 0 100 200 300 400 500 600 201 2 201 3 201 8 201 6 201 4 201 5 201 7 201 9 202 0 202 1 202 2 LNG - US LNG - Russia LNG - Others NG - Russia NG - Norway NG - Others LNG 4 09-02-2023 | COPYRIGHT AFRY | EL MERCADO ELÉCTRICO ESPAÑOL A MEDIO PLAZO Pipe LNG Pipe
5. GAS – PRICES BEFORE RUSSIAN INVASION Gas prices have been relatively stable during the past decade. However, since 2020 the market has experienced a significant upward development… 70 60 50 40 30 20 10 0 TTF DA Asian (EAX) Spot LNG EUR/MWh EUR/MWh Post Fukushima period • Gas price in driven by LNG cargos being diverted to Asia • High price period Stable period • Prices were relatively stable ranging from €15-30€/MWh • PVB is constantly at a premium above TTF due to poor liquidity and interconnection with NWE Warm winters & Covid • Warm winters in 2019 & 2020 + high LNG imports into EU + demand reduction due the COVID • Gas price reached record low levels 0 Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Dec- Jan- Dec- 2012 2013 2014 2015 2016 2017 2018 2019 2020 2020 2021 2021 50 100 150 200 Simultaneity adverse effects • Prolonged winter 2020/21 in Europe • Asia summer heatwave & Brazil drought • Quicker Chinese recovery from Covid-19 • US storage low (due to low 2020 prod.) • Russia supply by pipe lower than usual Prolonged winter BNetzA suspended Nord Stream 2 Diminished Russian supply into EU ‘Beast from East’ PVB DA Brent 10% Notes: East Asia (EAX) index is calculated using an arithmetic average of the day’s DES front month and second month ahead assessments for Japan, So uth Korea, Taiwan and China Source: AFRY Management Consulting with data from ICIS and Thomson Reuters 5 09-02-2023 | COPYRIGHT AFRY | EL MERCADO ELÉCTRICO ESPAÑOL A MEDIO PLAZO LNG Glut Covid-19
6. GAS – PRICES AFTER RUSSIAN INVASION …2022 was an even more dramatic year with TTF reaching +€300/MWh with Spanish price at a discount to TTF. At the start of 2023, the market seems to have relaxed 350 300 250 200 150 100 50 0 TTF DA Asian (EAX) Spot LNG EUR/MWh Jan- Jun- Dec- Jan- Feb- Apr- Jan- 2022 2022 2022 2023 2023 2023 2024 War in Ukraine – Period of high and volatile prices • End of 2021 - more LNG and milder weather lead to a huge drop in prices • From early 2022, the gradual reduction of Russian gas pushed global gas prices upwards • Russian invasion created unprecedented uncertainty and volatility for both EU and Asian markets • The insufficient LNG infrastructure in NWE pushed LNG volumes towards Spain - PVB below TTF Forwards as of 13/01/2023: Expected future prices • Current forwards are around €60-70/MWh • Still high compared to the period before 2021: €20-30/MWh • Much lower compared to 2022 prices Notes: East Asia (EAX) index is calculated using an arithmetic average of the day’s DES front month and second month ahead assessments for Japan, So uth Korea, Taiwan and China Source: AFRY Management Consulting with data from ICIS and Thomson Reuters 6 09-02-2023 | COPYRIGHT AFRY | EL MERCADO ELÉCTRICO ESPAÑOL A MEDIO PLAZO Mild weather & high LNG imports Unscheduled maintenance on Nord Stream 1 PVB DA Brent 10%
7. GAS – THE OUTLOOK FOR FUTURE GAS PRICES There is a significant uncertainty of the EU gas balance in the short-term while in the medium-term decarbonisation and renewable energies should help to fill the gap Source: AFRY Management Consulting 2 Global LNG market 3 Storage levels Pipeline − In 2022, Russia pipeline imports decreased by ~80bcm − In 2023, 30bcm/y if Q422 flow rates persist Europe’s demand − Baseline demand in Europe: ~500bcm/y − Demand dropped by ~15% in 2022 vs avg. 2017-2021 − Economic recession, gas prices & weather should affect China’s demand − Baseline demand in China: 400bcm/y − Covid-19 restrictions & resurgence of infections should impact demand growth New LNG supplies − No major increases expected for global LNG supply − An increase of ~25 bcm/y (assuming US Freeport return in Q1 2023 and improvements in EG, NG, T&T) KEY FACTORS AFFECTING THE EU GAS SUPPLY/DEMAND BALANCE 1 Russian gas supply LNG − RUS exported 17bcm and ~20bcm to EU in 2021 & 2022. − Similar in 2023 as there are no sanctions on Russian LNG EU regasification capacity − Regas capacity growing and should not be a constraint − 10bcm/y added in NL and FI. 15bcm/y in DE and other 15bcm/y expected by the end of 2023 4 EU & Global gas demand − 2023 starts with +80% storage levels - 90bcm. Compared to a 55% level at the beginning of 2022 − The key point is the storage volume that will be spent in the first 3 months of 2023 5 Supply substitutes New LNG supplies − Prices should stabilize reflecting the long-run marginal cost of new LNG supply (in particular from the US) Short-term 6 09-02-2023 | COPYRIGHT AFRY | EL MERCADO ELÉCTRICO ESPAÑOL A MEDIO PLAZO Mid-term Decarbonisation & RE gases − Decarbonisation goals should reduce demand − Renewable H2 and biomethane
8. Carbon prices have been set by the political decarbonisation ambition and shall rise in the long term up to the cost of negative emission technologies CO2 SPOT CARBON PRICES IN THE EU ETS (€/TCO2, NOMINAL) Source: Our World in Data − Economic crisis during Ph.2 − Rise in 2021 around information and speculation about ‘Fit for 55’ and tighter 2030 target − Gas market tensions and return to coal − Key factors − Decarbonisation targets − Proposed expansión to maritime − Economic recovery? − Fit for 55 proposes adjusted MSR − Brexit tightened market, but may recouple − International aviation − German coal phase-out cancellations? − Overlapping policies on clean techs − >Phase IV targets? 2050 objectives? 8 09-02-2023 | COPYRIGHT AFRY | EL MERCADO ELÉCTRICO ESPAÑOL A MEDIO PLAZO
9. Carbon prices have been set by the political decarbonisation ambition and shall rise in the long term up to the cost of negative emission technologies CO2 DEMAND FOR ABATEMENT (MTCO2) CO2 EMISSIONS BY SECTOR (MTCO2) − 61% reduction by 2030 − Uncertainties >2030, towards ‘net zero’ in EU ETS − Clean technologies − New fuels − Biomass and CCUS in the long run 9 09-02-2023 | COPYRIGHT AFRY | EL MERCADO ELÉCTRICO ESPAÑOL A MEDIO PLAZO
10. Wholesale price volatility has increased over the last years as a result of the increasing renewable penetration HISTORIC SPANISH MARKET OVERVIEW 0 20 40 60 80 100 €/MWh, nominal 120 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 WHOLESALE PRICE EVOLUTION ANNUAL MONTHLY HOURLY 0 100 200 300 400 500 600 700 800 21- 01 21- 02 21- 03 21- 04 21- 05 21- 06 21- 07 21- 08 21- 09 21- 10 21- 11 21- 12 0,00 0,50 1,00 1,50 2,50 2012 2013 2014 2015 2016 2017 2018 2019 2,00 2020 2021 2022 Jan Fe b Mar Apr Ma y Jun Jul Aug Sep Oct No v Dec Monthly avg / Yearly avg 10 09-02-2023 | COPYRIGHT AFRY | EL MERCADO ELÉCTRICO ESPAÑOL A MEDIO PLAZO
11. High volatility of curtailment periods driven by weather patterns and the capacity mix will continue HISTORIC SPANISH MARKET OVERVIEW − high impact of weather patterns, particularly hydro (but in the future also wind and solar!) − high impact of flexible demand (including storage and interconnections) − changing hours of low prices from windy nights to windy and sunny days at noon * Proxy for RES curtailment based on day-ahead wholesale price Historic frequency of hours with marginal pricing set by RES* 11 09-02-2023 | COPYRIGHT AFRY | EL MERCADO ELÉCTRICO ESPAÑOL A MEDIO PLAZO
12. Wholesale price volatility has increased over the last years as a result of the increasing renewable penetration HISTORIC EVOLUTION OF RES CAPTURED RATES 12 09-02-2023 | COPYRIGHT AFRY | EL MERCADO ELÉCTRICO ESPAÑOL A MEDIO PLAZO
13. Several new regulations have been passed in an attempt to reduce electricity tariffs REGULATORY ANALYSIS – 2021 & 2022 WHOLESALE ELECTRICITY PRICE AND GAS EVOLUTION Source: OMIE, MIBGas and OMIP 550 500 450 400 350 300 250 200 150 100 50 0 9_202 1 1_202 1 3_202 2 8_202 1 2_202 1 5_202 1 3_202 1 4_202 1 12_202 2 6_202 1 7_202 1 9_202 2 10_202 1 6_202 2 11_202 1 12_202 1 1_202 2 2_202 2 4_202 2 5_202 2 7_202 2 8_202 2 10_202 2 11_202 2 Electricity Gas RDL 17/2021 (14/09): - Windfall profits tax from high gas prices. - Long-term energy auctions. - New grid charges. RDL 23/2021 (26/10): - Included exceptions to energy under windfall profits tax. RDL 06/2022 (29/03): - Included new windfall profits tax for bilateral contracts (€67/MWh). - New fee (€1.03/MWh) to finance Social Tariff to all generators. - Update to RECORE parameters. - Update of grid charges. RDL 10/2022 (13/05): - Iberian gas price cap to CCGTs. - Modification of windfall profits tax to include the gas cap. - Mandate to reform the PVPC. RDL 11/2022 (25/06): - Windfall profits tax extension up to December 2022. RDL 17/2022 (20/09): - Inclusion of CHP technologies under the Iberian gas cap measure. RDL 18/2022 (18/10): - Windfall profits tax extension up to December 2023. 13 09-02-2023 | COPYRIGHT AFRY | EL MERCADO ELÉCTRICO ESPAÑOL A MEDIO PLAZO
14. Current Spanish regulation is more effective than the EU regulation on limiting market revenues for inframarginal technologies REGULATION – (TRANSITORY) PRICE CONTROLS RDL 17/2021 – WINDFALL PROFITS CLAWBACK Introduced a clawback to reduce revenues derived from the increase in gas prices and high volatility. Applies to all non-emitting technologies, except those under a regulated revenue scheme. Energy under a long term contract is also exempted. RDL 06/2022 includes a new clawback for long term contracts with a strike price higher than €67/MWh. Seems compatible with EU Regulation (art. 8), since it limits market revenues of producers. DRAFT LAW TO ESTABLISH A TEMPORARY ENERGY TAX The Spanish government aims to introduce a new temporary tax to energy entities (1.2% of 'taxable' revenue). It will apply for fiscal years 2023 and 2024 and will exclude revenue from regulated activities and foreign business activities. EU REGULATION 2022/1854 – EMERGENCY INTERVENTION TO ADDRESS HIGH ENERGY PRICES Establishes an emergency intervention to mitigate the effects of high energy prices through targeted and time-limited measures: - Reduce electricity consumption, - Introduce a cap on market revenues, - Enable Member States to apply measures of public intervention; and - Establish rules for a mandatory temporary solidarity contribution from EU companies. Measure EU regulation Spanish regulation Cap on market prices Not allowed Gas price capped at €40/MWh Cap on market revenues Allowed at €180/MWh Gas price higher than €20/MWh Solidarity taxes 33% of extra profit 1.2% of taxable revenue RDL 10/2022 – ‘IBERIAN EXCEPTION’ Limits wholesale price by imposing a cap to the gas price at which gas-fired plants must bid in the market (€40/MWh + €5/MWh a month). The measure was allowed by the EU due to the limited interconnection between Iberia and the rest of Europe, resulting in low market distortion. Seems not compatible with EU Regulation, but might be extended since it is considered an exception. 1 2 3 14 09-02-2023 | COPYRIGHT AFRY | EL MERCADO ELÉCTRICO ESPAÑOL A MEDIO PLAZO
15. 𝑃𝐺𝑁 − 𝑃𝑅𝐺𝑁 𝑌 = 0.55 Being: − PGN [€/MWh]: MIBGas price − PRGN [€/MWh]: reference gas price The ‘Iberian exception’ measure aims to reduce wholesale electricity prices by introducing a cap to gas prices in an attempt to contain inflation REGULATION – (TRANSITORY) PRICE CONTROLS Objective The Government aims to tackle inflation by reducing wholesale electricity prices. Implementation The regulation limits the gas price at which gas-fired plants must bid in the market to €40/MWh. A +€5/MWhGas a month is increased from Jan23 to May23. Timeline From June 2022 until May 2023. Money exchange Demand indexed to wholesale markets (regulated + liberalised consumers with no long-term contract) pay an adjustment to subsidize gas-fired generation, in order to pay for their spot gas. Iberian exception The measure was allowed by the EU due to the limited interconnection between Iberia and the rest of Europe, resulting in low market distortion. 40 40 40 40 40 40 40 45 50 55 60 65 PRGN Jun- Aug- Oct- Dec- Feb- Apr- 22 22 22 22 23 23 − RDL 10/2022 modifies RDL 17/2021 by changing the parameter PGN from the MIBGas price to the reference gas price (PRGN ). − RDL 17/2022 complements RDL 10/2022 by allowing CHP technologies under the RECORE scheme to receive the subsidy, subject to them leaving temporarily the RECORE. PROS CONS Contains inflation. Reduces wholesale prices. Limits EU market distortion. Reduces merchant RES revenues. Increases gas consumption. Subsidizes French demand through the interconnection. 15 09-02-2023 | COPYRIGHT AFRY | EL MERCADO ELÉCTRICO ESPAÑOL A MEDIO PLAZO
16. Extending the Iberian exception would bring the average tariff downwards at the expense of inframarginal technologies revenues REGULATION – IBERIAN EXCEPTION 0 50 100 150 200 202 4 202 3 202 7 202 5 202 6 202 8 Wholesale price + adjustment cap (€/MWh, nominal) Uncapped Cap at €40/MWh Cap a €70/MWh 25 7 45 11 Other Cap at concepts €40/MWh Uncapped Wholesale Gas cap Energy comp. 162 3 Other Cap at concepts €70/MWh 2 Wholesale Gas cap Energy comp. 209 194 -22% Average end-user price – year 2025 (€/MWh, nominal) -7% REGULATORY GAS CAP SCENARIOS To illustrate the impact of the possible regulatory changes to come related to the Iberian gas cap exception, we have modelled two sensitivities that extend until 2027, when prices return to the €60-70/MWh range. − The Iberian exception is extended at €40/MWh in line with current cap. − The Iberian exception is extended at €70/MWh in line with May 2023 cap. Now that the EU has shown an interest in drastically intervene to control prices, we expect the Iberian exception to be extended over a longer period than initially thought. MODELLING RESULTS − The effect of the Iberian exception on the end-user tariff is clear. The average retail prices experiences a reduction of 7% with a cap at €70/MWh and a reduction of 22% with a cap at €40/MWh in place. − The main reduction comes from the energy cost even including the compensation to be paid to gas-fired generation. Every tariff segment benefits from this reduction, both residential and industrial consumers. − The other concepts (tolls, charges, REER and cap payments) experience minor changes. From 2027 onwards: • Expected balanced gas market • Expected end of transitory regulations 16 09-02-2023 | COPYRIGHT AFRY | EL MERCADO ELÉCTRICO ESPAÑOL A MEDIO PLAZO
17. REGULATORY ANALYSIS – 2021 & 2022 Regulatory intervention impact on revenues for three route-to-market examples 102 109 26 76 Uncapped price Gas clawback Gas cap Capped price Net revenue Assumptions: 𝑃𝐺𝑁 − 20 ∗ 𝛼 40 − 20 ∗ 0.9 𝑌 = 𝑄 ∗ = 𝑄 ∗ 𝐹𝑀𝐼𝐺 0.7 𝑌/𝑄 = €25.7/𝑀𝑊ℎ 𝑌 = 𝑄 ∗ 𝑃𝐼𝐶𝑃 − 𝑃𝐹𝐶 ∗ 𝛼 = 𝑄 ∗ 75 − 67 ∗ 0.9 𝑌/𝑄 = €7.2/𝑀𝑊ℎ Fully merchant With PPA at €75/MWh With PPA at €50/MWh 211 211 211 ▪ Captured price (with cap): €102/MWh ▪ Captured price (without cap): €211/MWh ▪ MIBGas price: €100/MWh ▪ %marginal hoursCCGT : 78% → FMIG = (0.55/(%marginal hoursCCGT )) = 0.7 A fully merchant asset would perceive a captured price of €102/MWh. If the gas cap would have not been applied, it would have received a price of €211/MWh. Its revenue is further reduced by €25.7/MWh due to the gas clawback, and the net revenue results in €76/MWh. 102 68 109 27 75 UncappedGas cap Capped PPA PPA Gas Net price price settlement price clawback revenue 7 For an asset with a PPA signed at a strike price of €75/MWh, a gas clawback of €7.2/MWh is applied and the final revenue obtained is €67.8/MWh. 102 17 09-02-2023 | COPYRIGHT AFRY | EL MERCADO ELÉCTRICO ESPAÑOL A MEDIO PLAZO 50 109 52 UncappedGas cap Capped PPA PPA Gas Net price price settlement price clawback revenue 0 50 An asset with a PPA signed at a strike price of €50/MWh is exempt of paying any gas clawback and its final revenue remains at €50/MWh.
18. REER auctions • market exposure • longer duration • bid price indexation • integration of storage, 18 09-02-2023 | COPYRIGHT AFRY | EL MERCADO ELÉCTRICO ESPAÑOL A MEDIO PLAZO Taxes • clarity on 7% tax • hydro tax regime • nuclear tax regime • socialised vs. non-socialised • symmetric scheme CO2 auctions income • Define use of auction revenues RECORE adjustment Grid tolls • More frequent updates than 1 year • Define use of potential Surplus of 'grid tolls' Grid access • Grid access tenders: how many, where? • Combined with economic regime (e.g. Portugal?) • Extension of milestones of RDL 23/2020 • Additional resources? Many national energy policy choices remain open for discussion REGULATION – OTHER POLICY DECISIONS €/MW • technologies and Maximum bid • More frequent update of Ro/Rinv than 3 years • Full shift of RECORE to REER to mitigate volatility of spot price
19. We expect that developers will face difficulties in reaching RTB driven by saturation of administrations and delays in permitting ENERGY POLICY – SPAIN'S ENERGY TARGETS SOLAR PV GRID CONNECTION REQUESTS STATUS (GW) ONSHORE WIND GRID CONNECTION REQUESTS STATUS (GW) Most of the available connection capacity is ‘reserved’ by older requests, with new milestones up to 5 years for COD, most of which are unlikely to achieve RTB. Capacity ‘lost’ by not meeting interim or final milestones will be ‘offered back’ to the market through new grid access tenders. This process is and will not be linked to auctions. We expect a combination of developments being viable thanks to a combination of auctions, and merchant projects with or without PPAs. Based on recent experience, we expect that capacity reaching COD will be determined by bottlenecks in the administrative permitting, and eventually some capacity reaching RTB might also face financing issues in absence of auctions or PPAs secured. 39 1 11 0 20 40 60 80 100 Acces & Connection autorization Access autorization no connection Access autorization ongoing 96 19 09-02-2023 | COPYRIGHT AFRY | EL MERCADO ELÉCTRICO ESPAÑOL A MEDIO PLAZO 4 21 0 20 40 60 80 100 Access autorization ongoing Acces & Connection autorization Access autorization no connection
20. SYSTEM OUTLOOK - NECP UPDATE Need to adjust the NECP 2030 targets to incorporate latest developments, and start looking beyond for policy decisions (2035 or 2040?) 125 100 75 50 25 0 150 175 200 201 4 201 5 201 6 201 7 201 8 201 9 202 0 202 1 202 2 Capacity (GW) 2025 PNIEC 2030 PNIEC 2030 AFRY 2035 AFRY +43GW -6GW CHP Battery Biomass CCGT Coal Nuclear Onshore Wind Pumped Storage Hydro Solar CSP Solar PV Technology Nov 2022 NECP 2030 Comment Onshore Wind 29.0 48.6 2.4 GW/y Very challenging, considering repowering Solar PV 17.7 38.4 2.6 GW/y Likely exceeded combining Utility Scale and Self-Consumption Solar CSP 2.3 7.3 1 GW/y Unlikely. Auctions? Political willingness to pay for CSP or similar service? Biomass 1.1 1.7 0.1 GW/y Reachable Nuclear 7.1 3.1 -4 reactors Possible but unlikely, Security of Supply CCGT 24.7 24.7 0 Possible (with a CRM) Coal 3.2 0 close all Reachable. CHP 6.1 4.0 -0.3 GW/y ? Hydro 17.0 17.5 0.06 GW/y Possible Pumped Storage 3.3 6.7 +3.5 GW Unlikely (permitting, economics) Batteries 0.0 2.5 0.5 GW/y Possible with EU funds, CRM, others Inter Sp-Fr 3 10 +3 projects Unlikely (permitting, technical, economics) - Flexible scenarios for potential new demands (e.g. Hydrogen) - Need to give investment signals >2030 20 09-02-2023 | COPYRIGHT AFRY | EL MERCADO ELÉCTRICO ESPAÑOL A MEDIO PLAZO
21. Different RES investment regulatory categories have different merchant and regulatory exposure triggering different trading appetite RES INVESTMENTS REGULATORY CATEGORIES INVESTMENT OPTIONS IN RES ASSETS Investment on-grid Existing RD 413 Merchant Development Auctions RD 960 Merchant No PPA PPA Physical (Corporate/Supplier) Financial (Corporate/ Supplier/Trader) Investment off-grid Electrolysis Self- consumption 21 09-02-2023 | COPYRIGHT AFRY | EL MERCADO ELÉCTRICO ESPAÑOL A MEDIO PLAZO
22. The government has developed a new set of renewable auctions in an attempt to reach the renewable capacity NECP target RES INVESTMENTS REGULATORY CATEGORIES– RENEWABLE AUCTIONS ENTRY AND EXIT TIMELINE AND MINIMUM VOLUMES NEW REGULATORY FRAMEWORK FOR RENEWABLE AUCTIONS − The RDL 23/2020, published on 23rd June 2020, is a Law that enables the Government to organise auctions with a new remuneration scheme per energy produced − Royal Decree 960/2020 for the economic regime of renewable energy (REER) was released, providing additional detail on the structure and the design of the remuneration: − a strike price with a Contract for Difference will be auctioned, with a pay-as-bid clearing; − the hourly settlement will be done by the market operator OMIE, with a formula which may depend on the strike price and the hourly wholesale price, where a coefficient ranging 0 to 0.51) can multiply the hourly difference (positive or negative) to be added/subtracted to the strike price, in order to provide better price signals to hybrid plants with storage; − a ‘minimum energy’ shall be produced over a given period, with periodic checks that this energy is met; underproduction can imply penalties. A ‘maximum energy’ in a ‘maximum period’ will have the right to access the remuneration mechanism, and this period will be generally 10 to 15 years. 1) Order TED/1161/2020 established a coefficient of 0.05 for projects without storage and and 0.25 for projects with storage and biomass Minimum auction volumes per year (MW) 2000 2021 2022 2023 2024 2025 Wind 1,000 1,500 1,500 1,500 1,500 1,500 Solar PV 1,000 1,800 1,800 1,800 1,800 1,800 Solar CSP 200 200 200 Biomass 140 120 120 Others 20 20 20 22 09-02-2023 | COPYRIGHT AFRY | EL MERCADO ELÉCTRICO ESPAÑOL A MEDIO PLAZO
23. Auctions resulted in a similar procurement of wind and solar; however, ACP are expected to increase in the following auctions Note: ACP stands for Awarded Clearing Price COMMENTARY The auction calendar scheme was set up in 2020 aiming to procure at least 19GW of RES capacity by 2025. In first two auctions, 6GW of RES have been procured. The latest auction (Oct-21) from the existing tender scheme, saw slightly higher bids compared to Jan-21 in the range of €24,4/MWh - €36,9/MWh . Solar PV slightly underbid onshore wind in January 2021, this trend was reversed in October, driven by evolving technology costs. As a minimum technology volume is set in the auctions, this resulted in a similar capacity being procured by the two technologies (wind: 3.3GW, solar PV: 2.9GW). ACP is driven by current LCOEs of technologies, support levels requested by the banks to get financing as well as electricity price forecasts as contracts have typically a length of 12-15 years therefore allowing for an important tail post support scheme. Lately, ACP has also been affected by regulatory uncertainty. Tender price evolution is expected to increase due to the following factors: • Unavailability of technology is leading to highest cost. • Increase in interest rates. • Opportunity cost derived from the market windfall profits. AUCTIONED CAPACITY (MW) AND WEIGHTED-AVERAGE PRICES (€/MWH) €/MWh RES INVESTMENTS REGULATORY CATEGORIES– RENEWABLE AUCTIONS Biomass 146 23 09-02-2023 | COPYRIGHT AFRY | EL MERCADO ELÉCTRICO ESPAÑOL A MEDIO PLAZO Solar PV 866 Wind 998 Wind 46 Solar PV 31 10 0 30 20 50 40 70 60 90 80 100 Nov- 21 Sep- 20 May-21 Mar-21 Sep- 21 Nov- 22 Jan-22 May-22 Jul-21 Jul-22 Mar-22 Sep- 22 Nov- 20 Jan-23 Jan-21 Solar PV 2,036 Wind 2,258
24. Tariff design is likely to keep evolving, and should consider changing system needs IMPACT ON PRICES AND POTENTIAL TARIFFS DESIGN Current tariffs – Business day Current tariffs – Non-business day AFRY’s proposal – Non-business day 0.0 1.5 1.0 0.5 2021 2025 AFRY’s proposal – Business day Peak Flat Off-peak GRID CHARGES − High grid charges in hours of solar cannibalisation, which disincentivises EV charging and load management to maximise RES integration − Charges incentivise self-consumption, which does not need incentives, or can be incentivised through other mechanisms (e.g. 'IBI' property tax discounts) − Problematic 'evening peak' not addressed in weekends − Proposals: − modify hourly periods to give RES integration signals (vs. grid utilisation) − as total grid charges reduce, shift from 3 periods to 2 periods (Peak and Off-peak) − stronger price differentials to incentivise demand response or batteries 0.5 0.0 1.0 1.5 23 0 0 8 16 16 24 09-02-2023 | COPYRIGHT AFRY | EL MERCADO ELÉCTRICO ESPAÑOL A MEDIO PLAZO 8 23
25. SOURCES OF UNCERTAINTY − Capacity mix − PPAs / hedges − Current regulation − windfall profits − 'Gas price cap' − Pending regulation − EU price cap, Iberian extension − Proposed 'carbon dividend' − Volatility of commodities − Gas, Coal, CO2 − Ukraine − Weather − Volatility of demand − weather, price responsiveness − Self-consumption − Garantees Future prices expectations are affected by a wide range of market and regulatory uncertainties HISTORIC PRICES AND OMIP FUTURES MONTHLY PRICES IN EUROPEAN MARKETS Market model 25 09-02-2023 | COPYRIGHT AFRY | EL MERCADO ELÉCTRICO ESPAÑOL A MEDIO PLAZO
26. Potential LCOE evolution of renewable technologies will determine minimum revenue requirements FUTURE DRIVERS OF POWER PRICES SINGLE TRACKER SOLAR PV* 0 10 20 30 40 50 60 LCOE (€/MWh, real 2019) ONSHORE WIND* * AFRY’s own estimates for a fairly wide range of observed and expected Capex, Opex, and load factors; and own views on projected hurdle rates 0 10 20 30 40 50 60 2020 2025 2030 2035 2040 2045 2050 HIGH Merchant IRRs LOW Feed-in-Tariff IRRs 2020 2025 2030 2035 2040 2045 2050 HIGH Capex/Opex & LOW Load Factor LOW Capex/Opex & HIGH Load Factor 26 09-02-2023 | COPYRIGHT AFRY | EL MERCADO ELÉCTRICO ESPAÑOL A MEDIO PLAZO
27. Cost pricing vs. value pricing of a PPA RES INVESTMENTS REGULATORY CATEGORIES– PPA OVERVIEW OMIP Futures on 24/01/2023 2022 2024 2026 2028 2030 2032 2034 2036 Assumed discount (15-20%) EVOLUTION OF PPA PRICES €/MWh Market price PPA value Cost value Price value (no discount applied) MARKET OVERVIEW —Currently, due to high electricity prices, the PPA market has transformed into a seller’s market. The expected PPA price differs considerably from the LCOE of projects. —It is expected that as the situation comes back to pre-war levels, the valuation of PPAs approximates to LCOEs and it returns to a buyer’s market. 27 09-02-2023 | COPYRIGHT AFRY | EL MERCADO ELÉCTRICO ESPAÑOL A MEDIO PLAZO
28. There is no single option but trade-offs between maximizing returns vs. sleeping well 28 09-02-2023 | COPYRIGHT AFRY | EL MERCADO ELÉCTRICO ESPAÑOL A MEDIO PLAZO RES INVESTMENTS OPTIONS OPTIONS FOR RES DEVELOPERS − Fully merchant − Complex financing − Regulation and intervention − Market fundamentals − Diversification strategy − High upside vs. high risk − PPAs − 5-10-15 years of good sleep − Better financing − Hedge risk of future low prices − Complex negotiations − Auctions − 12 years of good sleep − Room for upside − Simple negotiation − Lower competitive returns
29. CONTACT INFORMATION AFRY MANAGEMENT CONSULTING JAVIER REVUELTA Senior Principal Plaza Marqués de Salamanca 3-4, quinta planta, 28006 Madrid | Spain javier.Revuelta@afry.com 29 09-02-2023 | COPYRIGHT AFRY | EL MERCADO ELÉCTRICO ESPAÑOL A MEDIO PLAZO
30. Las únicas rutas actuales para el gas ruso son vía Ucrania y Turquía ANNEX 30 09-02-2023 | COPYRIGHT AFRY | EL MERCADO ELÉCTRICO ESPAÑOL A MEDIO PLAZO
31. Sigue llegando gas ruso por varias rutas y por GNL ANNEX 31 09-02-2023 | COPYRIGHT AFRY | EL MERCADO ELÉCTRICO ESPAÑOL A MEDIO PLAZO
32. Rusia está enviando a Europa ~1/5 vs 2020, y podrían reducirse más los flujos ANNEX 32 09-02-2023 | COPYRIGHT AFRY | EL MERCADO ELÉCTRICO ESPAÑOL A MEDIO PLAZO
33. EEUU inyectará grandes cantidades de GNL durante toda la década ANNEX 33 09-02-2023 | COPYRIGHT AFRY | EL MERCADO ELÉCTRICO ESPAÑOL A MEDIO PLAZO
34. Mercado de electricidad 34 09-02-2023 | COPYRIGHT AFRY | EL MERCADO ELÉCTRICO ESPAÑOL A MEDIO PLAZO ANNEX − Corto plazo − 'cap de gas' y 'windfall profits de gas' − evolución de demanda y mix de capacidad − evolución de costes regulados − otros (FNSSE, Dividendo de carbono, diseño peajes y cargos..) − Medio plazo − decisiones políticas sobre la energía nuclear − instalación de renovables y almacenamiento
35. Los costes regulados bajarán por descenso de RECORE y FADE, y mayor demanda ANNEX 35 09-02-2023 | COPYRIGHT AFRY | EL MERCADO ELÉCTRICO ESPAÑOL A MEDIO PLAZO