Wind, solar to account for over half of the Iberian power mix by 2030

Source: Heren

2019/04/03

LONDON (ICIS)--Wholesale electricity prices in the Iberian markets will increase from 2020 to 2025, according to ICIS Power Horizon modelling.

Average power prices are expected to rise from around €53.00/MWh in 2020 to over €69.00/MWh by 2025 in Portugal and Spain.

From 2025 to 2030 prices are expected to fall due to expanding renewable energy capacity and declining carbon prices.

Price forecast

Since 2016, average spot delivery prices in Iberia have risen. In 2016 prices averaged €39.55/MWh and increased by 32% year on year in 2017 and 10% year on year in 2018.

Horizon modelling shows that prices will continue to rise, reaching a peak of €69.15/MWh in 2025, which coincides with an expected upward trend in carbon prices.

From 2025, prices are expected to decline again, following the shape of the ICIS carbon forecast and due to the expected growth in renewable generation. Some price support is likely to come from falling coal and nuclear capacity in Spain.

Generation forecast

The Horizon model forecasts solar and wind generation in Iberia to grow from 87TWh in 2019 to 180TWh in 2030, leaping from 28% to 53% of total power generation.

Both gas and coal/lignite generation will decline in the mid-2020s partly due to rising carbon prices, but mainly due to capacity being phased out.

Beyond the mid-2020s, gas generation will remain profitable, offsetting intermittent solar and wind generation, and coal phase-out.

Capture prices for renewable

Capture prices indicate the theoretical prices that renewable producers can achieve when selling power on the wholesale market.

Overall, ICIS modelling suggests that capture prices will be slightly more favourable in Portugal compared to Spain for both solar and onshore wind.

In the mid-2020s both technologies seems to be in parity, but by the late 2020s solar capture prices fall to just €28.00/MWh on average in 2030.

The difference between the wholesale market price and the capture price widens as more renewable capacity is brought online as it intensifies this trend.

Commercial flows

Based on the Horizon forecast, imports from France to Spain will slightly decrease in the early 2020s due to the new Iberian capacity, which will bring around 3TWh of new generation per year.

However, in 2025 an increase in imports is expected as a result of peak power prices in Iberia.

Interested in learning more about long-term power market analysis? Register now for a free trial of ICIS Power Horizon, a pan-European power price forecast service by contacting justin.banrey@icis.com