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Published: 4/28/2020. Updated:

NERC: lower maximum price for electricity produced from RES in the new auction for the allocation of promotion quotas


For the new auction for the allocation of promotion quotas of electricity production from renewable energy sources (RES), National Energy Regulatory Council (NERC) has calculated the maximum price of electricity generated from RES at 45.06 EUR/MWh which will be used to set the maximum price premium to the market price to compete for the auction participants.

NERC will also approve the reference price in the nearest future. The maximum price premium of the successful bidder is calculated as the difference between the maximum price and the reference price.

The maximum price, compared to the price of the previous year (48.93 EUR/MWh), decreases by 7.9%.

The main reasons for the change are the following:

7.9% increase in the efficiency of wind power plants (actual data of AB "Litgrid" and AB "Energijos skirstymo operatorius") and correspondingly higher average annual production volumes from 1 MW;

1.2% lower total investment for RES power plant installation and connection – the amount of invested capital decreased on average by 16 thousand EUR/MW, of which about 14 thousand EUR/MW of capital to be invested in power plant installation (calculated according to German market data*) and 2 thousand EUR/MW for power plant connection (determined according to the actual data of AB "Litgrid" and AB "Energijos skirstymo operatorius");

• change in the total operating costs of the power plant: due to the decrease in the amount of capital to be invested, the volume of operating costs decreases by 1% compared to 2019, but balancing costs increases by 2.1%, therefore the total decrease in power plant costs is by 0.3% (actual data of UAB "Baltpool" and AB "Energijos skirstymo operatorius").

The maximum price is calculated by estimating the cost of producing 1 MWh of electricity from renewable energy sources (LCOE) applying the most technologically efficient technologies (in this particular case, solar and wind technologies have been assessed).

Promotion scheme

The maximum price calculated by NERC will be used to make payments to the winner of the auction from the Public Interest Services (PSO) budget. The maximum price does not change throughout the promotion period of 12 years.

Example of an incentive scheme: maximum price, reference price and price premium to be paid to the winner(s)

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The specific price premium paid to the winner(s) depends on the electricity prices on the market and may be lower than the one won in the auction. According to the Law on Energy from Renewable Sources, if the market price is higher than the maximum price set by NERC, the winner is not paid a price premium as the costs incurred by the entity are considered to be covered by income from electricity sold on the market, so no additional support is required.

Auction stages planned by the NERC

NERC will announce a new auction for the allocation of promotion quota where it is planned to allocate 0.7 TWh of annual electricity production quota from RES on 29 May 2020.

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IMPORTANT. In the event of the quarantine extension in Lithuania, NERC is considering the possibility of submitting auction documents and bids for the price premium remotely by electronic means. The procedure for submitting documents will be published together with information on the Auction.

It is planned that the documents for the Auction will be accepted on 7-21 August.

 

* Report of International Renewable Energy Agency "Renewable Power Generations Costs in 2018", Report of Fraunhofer Institute for Solar Energy Systems "Levelized Cost of Electricity Renewable Energy Technologies" (2018), Report of Deutsche WindGuard "Wind and Land" (2019).