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Montel Weekly: Solar Auctions Will Probably Be Replaced By PPAs in the Future

Montel Weekly: Solar Auctions Will Probably Be Replaced By PPAs in the Future

Date: February 16th 2021

Author: Peter Palčec

Category: En.vision

Topic: Electricity , Renewables , Energy policy

“In the future, I would say that when it comes to solar power, renewable energy source (RES) auctions will ultimately most likely disappear or at least become secondary to the power purchase agreement (PPA) market,” stated Harald Overholm, the CEO of Alight Energy, in a podcast for Montel Weekly.

Solarne elektrarne
Overholm explained that in the past the deployment of solar was mostly based on strict incentive regimes. “This is now changing pretty fast. In the past, Germany, for example, had a really rigid incentive regime when it comes to solar deployment. Now, however, unsubsidised solar power capacities, as well as PPA-backed solar capacities, can be deployed with no problems. The market in Europe has certainly become much more mature compared to the past,” he stated.
 
Overholm is of the opinion that a second wave of solar is happening in Europe. “The first wave was mostly based on capturing incentives and deploying solar capacities, according to government wishes. Now, however, the second wave is all about organically building up a solar market that is based on the idea that if you can create value for customers, you can build solar,” he pointed out.
 

Pandemic has actually increased demand for solar


Speaking about the COVID-19 pandemic, Overholm stated that the pandemic has not caused any significant disruptions to the company’s solar production side. “We haven’t faced any big obstacles in terms of building new solar capacities, and we were even able to complete construction of the biggest solar power park in Sweden during the crisis,” he emphasised.

“On the customer side – most of our customers are industrial and corporate – things were a little more complicated. There were a lot of disruptions in the short-term business segment, however, from a long-term perspective, the COVID-19 pandemic has triggered a stronger commitment to sustainability and development goals. We only need to look at the EU recovery package, which is very ‘green’. I would even go so far as to say that the pandemic has actually increased the demand for solar,” continued Overholm.

Additionally, Andreas Thorsheim, the CEO of the company Otovo, agreed with Overholm. “Our business in solar is more related to the residential market and the pandemic ripped through our supply chain when factories in China were put offline due to the virus. Now, however, I agree that the pandemic has increased interest in green technologies and I am very optimistic about 2021,” he pointed out.

Thorsheim continued by adding that, according to his estimates, the demand for solar will continue to be very strong in the future. “By 2025 in Europe as whole, the value of residential solar capacity investments will amount to EUR 9 billion annually. Countries that are still predominantly reliant on coal are installing more and more residential solar capacities. For example, Poland installed around 200,000 residential solar installations last year, making it the number one country in Europe per new solar panel installed. This is something no one anticipated three or four years ago,” he stated.

In his opinion, the main vision of solar is particularly strong. “If you can beat the grid and wholesale electricity price, then installing solar capacities makes economical sense, and property developers will soon realise this potential. Solar capacities can be built pretty fast and thus respond to demand very quickly. However, we expect that the largest demand for solar will arise when there are announcements of energy price hikes or big price changes,” added Thorsheim.

Additionally, the costs of solar technologies are falling rapidly. "This means that solar is now even becoming profitable in regions where it had previously been stated that they are not profitable enough locations for the installation of solar capacity. When we formed our company, we made a hypothesis that the deployment of solar capacity will be profitable everywhere, and I think that is becoming increasingly true. The hardware prices of solar technology will matter less and less, since they are almost moving towards zero. Thus, other areas, such as financing, marketing and logistics, are becoming more important,” mentioned Thorsheim.

In terms of solar in the Scandinavian region, Thorsheim mentioned that people are always sceptical, since the region is not really known for having a lot of sunny days. Additionally, the high labour costs and low electricity prices force solar power companies to be very efficient, automated and highly digitalised. “It was in the Nordic region that we learnt how to be effective and we are now using this knowledge in other parts of Europe,” he concluded.

However, when it comes to the deployment of solar, a unified regulatory framework is needed across Europe. “My number one wish for the future would be that the regulatory framework across Europe is evened out. This is something that the Commission has asked member states to do in order to level the playing field for PPAs, thus making the deployment of unsubsidised commercial solar efficient,” explained Overholm.

You can listen to the whole podcast HERE.




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