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PV’s progress towards market parity in Southern Europe has led to an explosion in subsidy-free projects in recent months. Solarplaza research indicates that more than 2.5 GW of subsidy-free capacity has been announced in the last six months across Portugal, Spain, Italy and France.
The rush to build these subsidy-free projects all comes down to solar market parity; the ability of project owners to provide electricity at a cost equal to or less than that of traditional supplies. This means developers can afford to build the plants without having to rely on government support, because they can sell the energy on spot markets or to large energy consumers through power purchase agreements (PPAs).
“Solar market parity means to have fair energy market rules that allow solar energy to take part to the main energy markets,”
“Solar market parity means to have fair energy market rules that allow solar energy to take part to the main energy markets,” said Paolo Rocco Viscontini, president of Italia Solare, Italy’s PV association and a partner in Solarplaza’s Solar Market Parity event in June.
In this respect, the term differs from grid parity, which is when solar generation costs less than that of fossil fuels. And although solar market parity projects do not need subsidies, the term is not exactly synonymous with subsidy-free, either. In Spain’s latest renewable energy auction, for example, the 3.9 GW of solar capacity awarded will effectively be selling electricity at market prices, according to José Donoso, president of Spain’s PV association, UNEF.
Thus, it hardly qualifies as being subsidised. The only support plant owners will receive is in the form of a ‘variable floor’ or minimum payment designed to allow projects to achieve what the government deems to be a reasonable profit. Over the last year, though, continuing declines in PV costs have given developers a way of eschewing government support structures altogether.
“In a market like the one we have in Europe, which is based on marginalism, when PV reaches market parity it means the total cost is cheaper than the variable cost of fossil fuels,” Donoso told Solarplaza.
“In a market like the one we have in Europe, which is based on marginalism, when PV reaches market parity it means the total cost is cheaper than the variable cost of fossil fuels,”
This is leading to massive interest in market-parity projects, particularly in Southern European markets where the economics of PV are most favourable. In Portugal, for example, press reports cited 756 MW of unsubsidised solar capacity approved in January, with around 2 GW more of projects awaiting approval from the Portuguese Directorate General for Energy and Geology.
In Spain, meanwhile, “according to the data we have, there are 24 GW of PV projects being processed in different autonomous communities that are due to sell straight to the market or through bilateral PPAs,” Donoso said.
The figure includes the 3.9 GW of projects awarded in the government auction, she noted. The uptick in activity is a welcome change for developers who have struggled to build projects after the Spanish government slashed renewable energy support in 2014.
A sign of the times is that Italian developer Solar Ventures, diamond sponsor at the Solar Market Parity EU event in Milan on June 5, is planning to build 1 GW of subsidy-free projects in Spain and Italy, another market badly hit by subsidy cuts. And as PV prices continue to fall, there are signs that solar market parity projects could extend across Europe.
"Around 30GW of subsidy-free solar energy could be installed across Belgium, France, Germany, Ireland, the Netherlands and the UK by 2030."
In March, for instance, Renesola of China and Green City Energy of Germany announced a joint venture to build 69 MW of subsidy-free projects in France. And the industrial giant Viessmann unveiled a 2 MW unsubsidised project in Germany, to be used partly for self-consumption and partly for sport market energy sales.
Aurora Energy Research, an Oxford, UK-based consultancy, has estimated that around 30 GW of subsidy-free solar energy could be installed across Belgium, France, Germany, Ireland, the Netherlands and the UK by 2030. The outlook is “definitely positive,” said Viscontini. “Tenders, auctions and PPAs are spreading all around Europe. This, coupled with system costs reduction, makes solar market parity projects ever more attractive for investors.”