AleaSoft, September 16, 2021. Interview by Pilar Sánchez Molina, from pv magazine Spain with Antonio Delgado Rigal, PhD in Artificial Intelligence, founder and CEO of AleaSoft. While consumers applaud the measures of the recently approved crash plan, the large renewable energy industrial association APPA fears that the development of the projects will be slowed and that legal uncertainty is generated regarding the investment. Antonio Delgado, CEO of AleaSoft Energy Forecasting, assessed the situation for pv magazine.
The crash plan approved on Tuesday by the Council of Ministers to deal with the runaway price of electricity was very well received by consumer associations, but other sectors did not look on the measure favourably, and we are not talking about electricity companies.
The Asociación de Empresas de Energías Renovables (APPA) set off the alarms of the sector by stating that the initiative puts projects at risk. The renewable energy industrial association believes that it could lead the owners to make the decision to temporarily paralyse their activity or denounce the power purchase and sale contracts, which, in addition, could further increase the price of the pool. It also claims that it could affect the viability of projects under development. The photovoltaic energy industrial association, UNEF, told national media that “it is evaluating its content”, but organisations such as Tüv Süd affirm that “the high energy cost derived from the rise in the electricity bill will cause a loss of competitiveness of national companies”.
pv magazine spoke with Antonio Delgado, CEO of AleaSoft Energy Forecasting, who assessed the measures included in the crash plan.
Could these measures really have an impact on renewable energy PPA and merchant plants?
Many of the measures announced by the Government will not have the desired impact on the electricity market price. The current situation of stratospheric prices in the European electricity markets is framed in a global context of historically high gas prices. A situation completely beyond the reach of the Spanish Government and even of the European Union.
On the other hand, there are the record prices of CO2 emission rights. This CO2 market is indeed a European issue and the European Union has the mechanisms at its disposal to moderate, stop and reverse this rise in prices that is putting the recovery from the crisis at risk. It’s a matter of political conviction.
What we are seeing is that the measures are being counterproductive for companies of the energy sector, including renewable energy companies, which are seeing their shares fall on the stock market in recent days and losing the confidence of the investment funds.
How can it be solved?
The Government should focus on those solutions that are within its reach: taxes and charges on the electricity bill and, through the European Union, the reduction in CO2 prices.
Measures that try to cut income to the production plants will be very counterproductive in the short‑term (falls of these companies in stock markets and loss of investor confidence) and in the long‑term (legal uncertainty that will scare away the strategic investments necessary for the energy transition).
And beyond Government measures, producers and large consumers must also have strategies to protect themselves from fluctuations in market prices. A robust, well‑planned and well‑executed risk management strategy will fully mitigate the market prices risk and even allow us to benefit from the advantageous situations that may arise. To design this strategy, which must include a PPA, a vision of long‑term market prices is necessary.
Is it possible to please everybody (consumers, electricity companies, renewable energy companies)?
It is not going to be possible to please everybody all the time. But the good thing about the market is that self‑regulates, if we do not intervene in it, of course.
In other words, if now it does not please the consumers, it is because during February of this year or for a large part of 2020 it did not please the generators with markets prices on the ground.
What our models show us is that prices in the long‑term always remain in equilibrium and that price fluctuations in most situations alternate. This situation of market in equilibrium in the long‑term is what gives security to investors and developers of renewable energy plants. If external measures are forced on the market with the intention of impacting prices, what is being done in the background is creating legal uncertainty that, in the long‑term, and even in the mid‑term, will have an impact opposite to that expected.
The only measures that we see effective when it comes to alleviating the current situation for consumers are all those measures that are within the reach of the Government, such as all taxes and charges on the electricity bill. And in the long‑term, it is necessary the investment in infrastructure for the production and transport of clean fuels such as green hydrogen and encouraging their consumption to replace the fossil fuels that we must import and that create a costly energy dependence as we are currently seeing.
Taking into account the global emergency situation due to gas prices, Europe could consider a temporary moratorium, suspending CO2 emission rights for one year for electricity generators and for large consumers.
Source: AleaSoft Energy Forecasting.