Summary 2021 (part III): A very complicated year for large and electro-intensive consumers

AleaSoft Energy Forecasting, December 17, 2021. This year 2021, the episode of extraordinarily high prices in the energy markets was the undisputed protagonist. The situation has been complex for the entire energy sector in Spain and Europe, but large and electro‑intensive consumers suffered especially hard this year and it highlighted the need for energy purchase strategies that protect the consumer facing unfavourable market scenarios such as the current one.

AleaSoft - PPA electrointensivo fotovoltaica

It is easy to deduce that those most affected in this episode of high electricity markets prices are large and electro‑intensive consumers, taking into account the macrovolatility in electricity markets prices, the uncertainty in the evolution of prices at the mid‑ and long‑term and the unprecedented rise in prices in the futures markets.

This extraordinary situation, in the midst of a global energy crisis, highlighted the importance of having a diversified energy purchase strategy supported by reliable markets prices forecasting at all horizons. An effective strategy must be based on diversification, placing fractions of the energy to be consumed at different horizons.

AleaSoft - previsiones precios mercados elecrtricos estrategia compraventa energiaEnergy purchase and sale strategy based on the diversification.
Source: AleaSoft.

The Statute of electro‑intensive consumers and PPA

One of the options of any energy purchase strategy should be long‑term bilateral contracts, PPA. These are best known for being one of the options available to renewable energy projects to achieve security in future income that, in many cases, they will need to obtain the necessary financing to carry out the project. But what financial entities are looking for in the PPA of a renewable energy project is the credit quality of the offtaker, the buyer of the energy. It is at this point where many large consumers are not able to provide the required long‑term guarantees.

At the end of 2020, Royal Decree 1106/2020 that regulates the Statute of electro‑intensive consumers was published. The Statute tries to alleviate the problem that the lack of guarantees represents for large consumers when signing PPA at competitive prices. The Statute establishes that electro‑intensive consumers will have to contract a PPA for at least 10% of their consumption and for a minimum duration of five years. In order for consumers to provide the necessary guarantees, long‑term electricity supply contracts signed directly or indirectly with electricity generation plants from renewable energy sources will have the endorsement and guarantee of the State. According to Fernando Soto, Director‑General of Asociación de Empresas con Gran Consumo de Energía (AEGE), in a webinar organised by AleaSoft Energy Forecasting “the industry needs visibility and certainty of long‑term prices, the PPA can be useful, but it must be at a competitive price”.

This 2021 had to be the year of the deployment of the Statute of electro‑intensive consumers, but the activation of a first coverage package by the Compañía Española de Seguros de Crédito a la Exportación (CESCE), the company in charge of providing the guarantees of the State in PPA signed by large consumers, did not occur until last November 2. This first package will allow accessing to the necessary guarantees for the signing of PPA contracts between electro‑intensive consumers and renewable energy developers within the framework of the Statute.

AleaSoft Energy Forecasting’s analysis on the prospects for energy markets in Europe and the renewable energy projects financing

In order to carry out a responsible energy purchase strategy, it is essential to have a clear vision of the future of the energy markets at all time horizons. Given the uncertainty about whether the current situation of very high prices in the energy markets could extend beyond the first quarter of 2022 and about how long it may take for prices to return to equilibrium prices, it is essential to have reliable and coherent electricity markets prices forecasting.

In the next webinar organised by AleaSoft Energy Forecasting, which will be the first in 2022 of its series of monthly webinars, the evolution of energy markets in Europe over the last few months will be analysed. The webinar will take place on January 13 and it will feature on this occasion with the participation of speakers from PwC Spain to analyse the impact of the regulatory and electricity market situation on the development of PPA, both off‑site and on‑site, and on the renewable energy projects financing.

Source: AleaSoft Energy Forecasting.
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