5/11/2017 1

RENEWABLE ENERGY AUCTIONS:

DRIVING FALLING PRICES

Allen Eisendrath

Global Climate Change Office

Director

USAID/Washington

Presented @IRENA Regional Workshop

on RE in Central Asia, 26 – 27 April 2017

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5/11/2017 2

World Wide Auctions: Solar PV and Wind

• Price discovery in rapidly-

changing environment

– Prices falling fast; faster than

governments can track

– FITs set price for a long period-

and they set it high

• Multiple rounds result in

improved investor confidence

• Certain objectives may be

weighed more than others

– Local participation

– Location

– Past Performance

– It’s not just price! 5/11/2017 3

Renewable Energy Auctions: The Basics

5/11/2017 4

To look at emerging prices, we look at auctions. Why?

Because they drive prices down.

Increased RE experience, falling prices

5/11/2017 6

BENDING THE COST CURVE FOR RE

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Utility-scale Solar PV Auctions/FITs, 2015-2016

.

Feed in Tariffs

• Mexico Second Round: 2.69 cents/kWh

– Lowest worldwide PV price

• Chile: 2.91 cents/kWh

• United Arab Emirates: 2.99 cents/kWh

• El Salvador: (1/11/17): 4.95 cents/kWh

7

Global Low PV Prices

• USA 2016: $2.5/MWh average new PPA

price (with production tax credit)

• Morocco: $30/MWh average price (with

production tax credit)

• South Africa: $47/MWh

• India: $52/MWh

• Australia: $57/MWh

8

Global Low Wind Prices

http://reneweconomy.com.au/record-low-wind-energy-price-in-act-auction-but-solar-not-far-behind-12195/; http://www.windpowermonthly.com/article/1386944/ontario-wind-auction-pushes-down-prices; https://www.gsb.uct.ac.za/files/REAuctionsInSA.pdf

5/11/2017 9

Brazil: RE Auctions Showed Strong Price Declines

5/11/2017 10

Comparison of Recent Latin

American Auctions

Note: 2015 generation data for PROINFA

projects is not disclosed.

Source: Bloomberg New Energy Finance,

ANEEL, ABEEolica

Capacity factors for Brazilian wind projects

under auctions and PROINFA FIT, 2012-15 (%)

0%

10%

20%

30%

40%

50%

60%

70%

80%

Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15

Auctions

PROINFA

0

1

2

3

4

5

6

7

Mexico-Auction

Sept 2016-Solar

Mexico-Auction

Sept 2016-Natural Gas

Chile- 2016Auction-

Solar

Chile- 2016Auction-

Natural Gas

Chile- 2016Auction-

Coal

UAE- 2016Auction-

Solar

UAE-Commodity

Market-Natural Gas

UAE-Hassyan -

Coal

Ce

nts

/kilo

wat

t h

ou

r (U

SD)

Power Plant Location and Type

Solar vs. Thermal Plant Price Comparison (2016)

RE prices in auctions can be lower than new coal and gas plant generation prices

• Australia: wind $80; coal $143; gas $116

• Chile: wind $38; gas $47; coal $57; $60

hydro; $66 geothermal

• South Africa: wind and PV Rand .62; coal

Rand 1.1; nuclear Rand 1.25; gas CCGT

Rand 1.1

• Denmark, Brazil & Mexico also have lower

RE costs than new thermal generation

costs13

New RE cheaper than

new coal or gas

14

Patterns of Price Decline

South Africa: Auctions get low

prices

For new contracts, US wind priced

drop to US 2.5 cents in 2014

16

5/11/2017 17

Mexico: Showing Global Best Practices

• GOM Target of 35% clean energy by 2024

• Contracted out 6 GW of RE capacity in 2 auctions

• 3rd auction scheduled for next month

• USAID assisted

• 3 record-low prices for

Latin America:

– Average tender price of

$33.5/MWh

– Wind price of $32/MWh

– Solar price of $27/MWh

• 19 companies won

contracts, a mix of state-

owned and private

companies, local and

international developers

5/11/2017 18

Mexico Round Two Results

5/11/2017 19

India: Towards 175 GW of RE

• National

renewable

energy target:

175 GW –

highest target in

world!

– 100 GW of solar

• More large-scale

solar farms

planned

20

India’s PV price evolution

5/11/2017 21

India’s First National Wind Auction

• Wind FiT

previously in

place

• 1 GW of

generation was

contracted

• GOI target is 75

GW of wind

What’s going on here?

22

Competitive pressure drive lower prices

More capacity drives supply chain & financing

develop

Lower prices lead to sector officials wanting

more RE

Better supply chain & financing drives lower

prices

Two feedback loops at

work

Grid Integration Options

Low-hanging fruit:

Low capital cost but

real political costs to

change institutional

context

Locate in areas of best resources

Develop common

infrastructure

Engage Private Sector

Establishing Renewable Energy Zones

Key Auction Trends

• Eliminating subsidies

• Bidding on subsidies

• Bidding on energy, not capacity

• Virtual PPAs

• More operational responsibility on the

generator: reactive power, forecasting,

curtailment, capacity

• Solar parks & wind zones

25

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Renewable Energy Auctions

Allen EisendrathGlobal Climate Change Office Director

USAID