Spain: third REER auction awarded 146 MW of biomass at an average of EUR 93.09/MWh

On 25 October 2022, in the third REER auction, the Spanish Ministry for the Ecological Transition (MITECO) awarded 146 MW of biomass electrical capacity. The weighted average price of the winning bids was EUR 93.09/MWh, with a maximum of EUR 108.19/MWh and a minimum of EUR 72.38/MWh. For biomass power producers this is the first clear signal of what the support price for new solid-fuel power plants looks like in Spain.

What was offered and what was awarded

There were 520 MW to be allocated. The pool included solar thermal energy (termosolar), distributed photovoltaics, biomass and other renewable technologies. In its statement of 26 October 2022 the ministry reported that 146 MW of biomass and 31 MW of distributed photovoltaics of a local nature had been awarded. The ministry noted that participants had submitted bids above the maximum price permitted by the auction rules; only biomass and photovoltaics were awarded.

According to the ministry, implementing the awarded projects is expected to trigger more than EUR 400 million of investment and generate about 4.4 thousand jobs. The auction took place in conditions that the ministry described as determined by the war in Ukraine: high inflation, rising interest rates and price tensions in the market for raw materials and equipment.

Biomass compared with earlier auctions

In the January 2021 auction the weighted average prices were EUR 24.47/MWh for photovoltaics and EUR 25.31/MWh for wind. Biomass had no technology-specific pool at the time; as the portal Energías Renovables reported, the biomass industry took part but stood no chance against photovoltaic prices. In the 2021 auctions biomass won no capacity, so the October 2022 result is the first in which it was awarded volume.

The difference in price levels is fundamental. Biomass pays for fuel, while photovoltaics and wind do not, so their bids are not comparable in terms of cost. The ministry openly admitted that biomass prices are higher than those of other renewables, but stressed that it is a dispatchable technology that can produce when the system needs it, and that as a synchronous source it eases the system's operation. It added that biomass creates jobs mainly in rural areas and makes it possible to make use of forest and agricultural waste.

Spread of bids

The difference between the cheapest and the most expensive winning bid was about EUR 36/MWh (108.19 minus 72.38). This means that in this auction there was no single rate for everyone: each winner receives the price resulting from its own bid.

What about biogas

The MITECO statement concerns biomass, not biogas. Biogas and biomass installations operating in Spain benefit from a separate specific remuneration regime based on standard installations; we describe its rules in the overview of the Spanish support system for electricity from biogas and biomass.

How to read this result

In 2022 Europe saw extremely high gas and energy prices. The biomass bids of October 2022 therefore record the cost level of that particular moment: high inflation, expensive capital and expensive fuel. For a comparison with the Polish market, see the summary of reference prices in the 2022 RES auctions, bearing in mind that in Poland the reference price is set by regulation, while in Spain it results from participants' bids.