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Due to regulatory concerns, Iberdrola will not participate in the Spanish renewable energy auction

Due to regulatory uncertainties around steps to reduce record-high power costs, Iberdrola (IBE.MC) opted not to bid in the most recent auction of the renewable energy capacity in Spain.  As recovering demand and decreased fuel supplies contributed to a sharp rise in global gas and electricity prices, Spain sold virtually all of 3.3 gigawatts (GW) of the new capacity it put on sale, smoothing the entrance of affordable renewable energy sources. Companies received guaranteed returns for solar and wind power generation through the auction at a set price that is only a portion – 15% – of the existing wholesale price, according to a statement from the Energy and Environment Ministry.

Energy costs have sparked a feud between the country’s largest utilities and the government, which feels the corporations have reaped undue profits by selling their electricity into markets with exorbitantly high rates. “This (the auction) simply emphasizes the importance of persevering in the energy system change,” stated Teresa Ribera, who is Spain’s minister for environmental transition. Madrid has stated that it will claw back earnings from corporations such as Iberdrola as part of a package of steps to regulate electricity prices. 

“Iberdrola did not participate in the auction due to regulatory uncertainties, which has caused us to rethink our renewable energy investments in the nation,” a spokesperson stated. Spain’s power firms have stated via AELEC, a trade association, that they are not gaining from the premium costs since they have sold all of their base output for this year, as well as the majority of what they anticipate to sell next year, at far lower rates than the spot market. find out more

According to a representative for Enel (ENEI.MI), Endesa (ELE.MC), which earlier this year blamed low profitability on the impact of rising gas prices, has opted not to participate in the auction owing to regulatory uncertainties. Naturgy (NTGY.MC), a Spanish utility that is seeking to increase renewable capacity and minimize its dependency on gas, has been allocated 221 MW of solar power.

Developers are often guaranteed a set price for the power generated by capacity auctions, which protects them from market instability. This is especially appealing to smaller players. The winning projects’ weighted average price in the auction was 20 percent higher than the preceding one in January, according to Ribera, a “decent” increase. Capital Energy, based in Madrid, was given 1.55 GW of capacity, according to a spokeswoman, after winning big in the previous round of the capacity sales in January.

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