ICIS Power Perspective: Oversubscribed Portuguese solar auction achieves lowest FiT bid in Europe – under profitable levels?

Author: Karla Lainez


This story has originally been published for ICIS Power Perspective subscribers on 13 August 2019 on 17:03 CET.

On 7 August, the Portuguese government announced the final results of the July 2019 solar auction, with a total of 1.15GW awarded to participants, which falls shy of the 1.4GW it was meant to tender.  With an oversubscribed auction, Portugal reached the lowest feed-in-tariff (FiT) bid ever achieved in Europe for PV capacity. Comparing the profitability of the projects under the different remuneration schemes, our modelling suggests that the project awarded the highest FiT will be more profitable than the highest contribution to the system project until 2022.


  • In December 2018, the Portuguese State Secretary for Energy, Joao Galamba, announced the intention to hold the first renewable energy auction in the country in Q2 2019
  • On 3 June, the legislative framework for the auctions was published, modifying and simplifying the bidding process through the creation of a “Bidding Portal
  • In early June, the government delayed the auction by two weeks until the second half of July

Auction design

  • According to the Decree-Law No 76/2019, there are two auction schemes available for a 15 year contract:
    • Guaranteed remuneration or Feed-in-Tariff (FiT): the price of the bid corresponds to a discount (expressed as a %) on the reference price set by the Government
    • General remuneration or Contribution to the system (CtS): the bidding price corresponds to a contribution to the system (€/MWh) which has to be paid to the TSO for the electricity generated. Under this scheme, producers are exposed to wholesale market prices. See below an schematic explanation of both remuneration schemes (theoretical data)

  • The first remuneration scheme is the traditional FiT where the project receives the offered price during the 15 years contract. In the first graph, all the green shaded area is the final profit the generator receives
  • The CtS scheme is a new remuneration scheme, an innovative modality under which solar producers would pay the achieved auction price to the grid operator to dispatch their electricity
    • This means that the renewable producers’ final revenue would be the wholesale market price minus the auction strike price
    • The second graph shows how the scheme works, the green shaded area represents the final revenue the producer will receive, the yellow area represents the contribution to the system and the red area that overlaps shows the payments they will make whenever the market price falls below the fixed contribution to the system price determined in an auction
  • If there is an injection point with a single bid, there will not be an auction. However, the single bidder will be notified to submit an offer in another node
  • The auction mechanism is currently the only way to receive a grid connection in Portugal
  • Licenses are not transferable; in order to guarantee the certifying title, the winners shall be required to provide guarantee of €60,000 /MW of injection capacity power which should be provided within a maximum of five working days
  • Successful bidders may provide ancillary services to system operator
  • The commissioning time for the projects is 36 months


  • A total of 1.15GW of capacity was allocated in the auction to 13 companies in 24 lots, divided as follows:
    • FiT scheme: 862MW allocated with a weighted average of € 20.33/MWh. The minimum and maximum bids were from Akuo Energy at €14.76/MWh and €31.16/MWh respectively
    • CtS scheme: 288MW allocated with a weighted contribution to the system of €21.35/MWh. The minimum and maximum bids were €5.1/MWh and €26.75/MWh respectively, both from Iberdrola

  • The graphs above show the price on the y axis, each bubble represents a winner with the lot number inside and the size denotes the quantity of capacity awarded throughout both schemes


  • In January, the Portuguese government released the draft of the National Climate and Energy Plan (NCEP) which proposes an incorporation of 7.6-9.4GW of solar capacity between 2019 and 2030
  • Our Portuguese Horizon forecast considers the following capacity evolution (link)
  • Power Horizon suggests that the new solar capacity will represent 12% in installed capacity and 7% in total generation by 2023
  • Using the ICIS Power Horizon model (Base Case), we calculate the expected annual revenues and capture prices that the following players might realise between 2020 and 2023 with an assumed installed capacity of 100MW:
    • The lowest FiT bid (€14.76/MWh)
    • The highest FiT bid (€31.16/MWh)
    • The lowest CtS bid (€5.1/MWh)
    • The highest CtS bid (€26.75/MWh)
  • Due to the exposure to the market price, the CtS projects see increasing annual revenues as a side effect of the rising wholesale price
  • Our modelling suggests that the high CtS project (€26.75/MWh) will be less profitable then the high FiT bid (€31.16/MWh) for the first two years analysed, but will become more profitable by 2023
  • Besides the net profit the producers will receive, our modelling shows how the losses are increasing through the years as the volatility intensifies with the RES incorporationIn our opinion, to judge the final profitability of the projects becomes more complex as they can be complemented by other income sources such as PPAs or the coexistence between both remuneration schemes

Next steps

  • In January 2020 the government is expected to hold the next solar auction, with around 700 MW on offer

Karla Lainez is Analyst for Power Markets at ICIS. She can be reached at powerperspective@icis.com

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