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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
Oa
xa
ca
, M
exic
o (
En
el w
ind
fa
rm)
• 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 6
BENDING THE COST CURVE FOR RE
3.03.53.73.83.94.14.44.85.05.86.06.16.16.46.56.56.66.96.97.57.77.87.98.18.58.78.88.98.99.29.4
11.211.4
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ico
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USA
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irst
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20
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ian
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ling
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an 4
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ctio
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5
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th A
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ile A
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ce S
ola
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RE
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zil A
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man
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uct
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riti
us
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r P
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uct
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10
-15
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…
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3 8
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ug.
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Ger
man
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50
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Pilo
t P
V A
uct
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II…
Vie
tnam
FIT
(U
nd
er R
evie
w)
Pak
ista
n F
IT (
No
rth
ern
- 2
0 -
50
MW
)
Ind
on
esia
FIT
(Ja
va)
Ph
ilip
pin
es S
ola
r FI
T
US$
c/kW
h
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
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
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
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