Low electricity prices pose a threat to photovoltaics

We begin with an article by Pilar Sánchez Molina in PV-Magazine about the current state of electricity prices in Spain. A couple of weeks ago, photovoltaic generation reached historic levels in Spain, Portugal, and Italy for the month of February. At first glance, these are good news to celebrate, but as renewable generation increases, electricity demand decreases. Bad news. Compared to last year, national demand fell by 2.3%, and by 10.5% when compared to values from 5 years ago. Electricity demand is at levels from 20 years ago.

Both data explain why the average electricity price on February 22 was €10.71/MWh. Javier Revuelta comments that due to the strong penetration of photovoltaics, average prices of €35-40/MWh this spring could imply solar capture prices as low as €10/MWh. He also comments:

“But there comes a point where more solar does not further reduce prices (which will already be at zero) but only pours resources. Before, we thought that profitability issues would start in 2025, but with recent rains and plummeting gas prices, we are going to start this year. March is expected to have periods of wind and solar resources superior to those of February, around 20 GW on sunny days. Considering that the caps in 2023 reached 16 GW, we have excess capacity of 5 GW, which will turn into 10 GW in 2025 and 15 GW in 2026. We already detected about 0.4 GW of photovoltaic curtailment in the daily market from 11 am to 4 pm on February 10, and simultaneously 2-4.5 GW of wind curtailment. We are witnessing the starting shot for prolonged low prices.”

In his opinion, Spain should accelerate regulations to incentivize storage and roll out the red carpet for any factory or industry willing to come. One of the problems precisely with the PNIEC is this. The plan envisaged a much faster electrification of the economy than the current pace, increasing at a rate of 5% per year, mainly attracted by the prospect of cheap energy.

We are reaching a point where more renewable does not mean cheaper energy but rather implies higher curtailments and, therefore, opportunity costs. This could jeopardize the entire industry and the jobs created in recent years.

Will there be a collapse of the photovoltaic industry in Spain, as already happened with the end of subsidies after the financial crisis?