Portugal's floating solar energy auction sets world record negative price

3 minute read

Operation electrician Joao Mendes of the Alto Rabagao Floating Solar Photovoltaic Park pilot project, exits a power collection tower at the Alto Rabagao Dam, in Montalegre, Portugal, September 22, 2021. Picture taken September 22, 2021. REUTERS/Violeta Santos Moura/File Photo

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LISBON, April 6 (Reuters) - Portugal's first auction of rights to build and operate floating solar plants on dam reservoirs set a world record low price for future output in what the government called a win for energy consumers.

The government assigned rights to install floating panels with capacity to convert sunlight into 183 megawatts worth of electricity, a large chunk of which went to native power company EDP Renovaveis (EDPR) (EDPR.LS), a unit of the country's main utility EDP (EDP.LS). EDPR's winning bid was a negative price, meaning it will pay the Portuguese electric system 4.13 euros ($4.50) for each megawatt hour it generates over 15 years, the environment ministry said.

A source with knowledge of EDPR's offer said the company offered a negative price on the solar energy because the project is a hybrid that also includes wind and energy storage, which should be profitable.

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"In this way, EDP guarantees the profitability of the hybrid project. As it will have a single point of connection to the grid, it will also have cost synergies between solar and wind," the source said, adding that potential integrated battery storage would further improve profitability.

EDPR will build floating panels with capacity to generate 70 MW at the southern Alqueva dam, the largest artificial lake in Western Europe.

This price compares with levels of around 250 euros per MWh on Tuesday in the Iberian wholesale market MIBEL. Throughout 2021, the average MIBEL price was 112 euros.

EDPR won also an additional 14 MW of solar over-capacity and 70 MW of hybrid wind capacity. The reference price for the future sale of energy in the auction was 41.03 euros.

Russia's invasion of Ukraine in February sent prices for gas used in power plants to historic peaks, prompting governments and companies to accelerate their bet on renewable sources such as wind and solar.

"The floating solar auction proved to be a success, with Portugal breaking a new record by setting the lowest energy price in the world. There will be gains for electricity consumers worth 114 million euros over 15 years," the environment ministry said in a statement.

Spanish utility Endesa (ELE.MC) won the right to install a 42-MW solar project on the northern Alto do Rabagao dam, where it plans to invest 115 million euros.

Iberian renewable firm Finerge was awarded three lots, each in different dams, to install a total of 38 MW of solar capacity, it said.

Portugal held two auctions in 2019 and 2020 for on-land solar parks and both set world records for the lowest price of future output.

($1 = 0.9165 euros)

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Reporting by Sergio Goncalves; Editing by Lisa Shumaker

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