L R AS Published on Monday 30 March 2020 - n° 315 - Categories:Europe

Is the epidemic threatening solar installations in Europe?

Experts and investors say Europe's solar renaissance should continue to flourish in the long term despite the impact of coronavirus and falling electricity prices.

The example of Spain's 300 MW Talayuela power plant is instructive. This power plant has a purchase contract (PPA)

which covers ten years and 75% of the production, with the remainder to be sold on the market. The epidemic is slowing the pace of construction, but this is nothing compared to the 20-30 year lifespan of this plant. The client agreed to a delay of two months.

The industry is adapting to the travel ban and the requirement for distance between workers. The cost of the panels is falling as Chinese production lines are picking up speed, while there are fewer buyers.

The challenge of declining demand and electricity prices Spain installed 4.9 GW in 2019 and could install the same amount in 2020. The other European countries should all post good figures this year as well. A large proportion of solar projects in Europe are not subsidised and are the result of negotiations with buyers or market prices. Lower electricity prices in the short term make it harder to make the investment case. Buyers will always want a discount of 10-20% in purchase contracts on the price of electricity from the grid. Therefore, in the short term, there could be clauses in the contracts to take account of this short-term drop in prices. In the medium and long term, interest in solar energy without subsidies in Europe seems to persist. The investment bank Augusta & co believes that solar projects could shine in a weakened global economy. It argues that infrastructures that can offer long-term returns become more attractive in times of uncertainty. In previous economic downturns or shocks, there has been an increase in capital flows. That said, the bank recognises that downward pressure on electricity prices is making conditions more difficult for marginal, unsubsidised markets such as the UK. On the other hand, as in Spain, where solar prices are well below spot prices, investment will continue to look attractive.

"In the future, there will be far more capital wanting to invest in renewable energy in Europe than there are opportunities. For the past five to eight years it has been a seller's market. In countries like Spain there is more capital than projects. »

Foreign investors are arriving and increasing the interest of the oil companies, although the fall in oil prices is reducing their investment capacity.

"The level of uncertainty is extraordinary. The good news is that the promotion of energy transition - whether you do it for reasons of energy security or environmental security - continues to enjoy strong momentum. The momentum that has driven this industry in recent years is still very much in place.

GreenTech Media of March 27

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