Only 8 TWh were contracted in solar and wind CfD auctions in Poland this year. This is a small number compared to ca 50 TWh in each 2020 and 2021. Winning auction prices materially improved vs previous year with the average price at ca 270 PLN / MWh, however, are significantly below current prices and their medium-term outlook.
CfD remains an interesting support mechanism for new RES sources in Poland. It gives a long-term financial stability and facilitates long-term debt financing. However, taking into consideration low price-base and very unfortunate benchmarking to daily TGE base, quite many investors decided not to bid, preferring to enter into Power Purchase Agreements (PPA).
Investors that decided to participate in the auctions mostly placed their bids only for a part of energy volume to be generated by their assets with the remaining part to be sold under PPA or at merchant risk. Asset Management team of Ergy supported our clients and investors in preparing their bidding strategy, both in terms of volumes and prices.
Setting a bidding price is a complex process requiring:
- Estimating the supply of projects that could participate in the auctions,
- Calculating levelized cost of energy (LCOE),
- Analysing alternatives, such as prices available under PPA,
- Performing statistical analyses of expected bids from other participants (incl. Monte Carlo simulations).
All our clients participating in the auctions secured CFD with their most conservative bids slightly above the average price and most aggressive bids only 2% below the maximum price.
Congratulations to all the CFD auction winners!