Going subsidy-free with PPA's - A closer look at BayWa r.e.'s Don Rodrigo solar project in Southern Spain
Power Purchasing Agreements, or PPAs, are becoming an indispensable tool in the large-scale development of solar in Europe, as they facilitate cheap, reliable and clean energy to corporations who want to save money on their energy bill as well as reduce their carbon footprint.
BayWa r.e., one of SolarPower Europe's sponsor members, has just announced a ground-breaking solar project in Southern Spain. Called the Don Rodrigo project, this solar installation of 170 MW will be developed using PPAs, making it the first subsidy-free solar project in Spain and one of the biggest in Europe. We discussed with Benedikt Ortmann, Managing Director BayWa r.e. Solar Projects GmbH, how BayWa r.e. developed this innovative project and what this means for the future development of European solar.
SolarPower Europe: BayWa r.e. has just announced that its Don Rodrigo solar project (170 MW) in Southern Spain will be developed via a power purchasing agreement (PPA) - this will make it one of the biggest projects in Europe without subsidies and a first for Spain. Can you tell us about the reasons behind this pioneering project?
BO: It was back in 2011 when we thought about the following: if grid parity was ever to occur with solar in Europe, it would certainly start in the southern countries, where we would expect the highest radiation values. If, for example, you compare the radiation between Germany and Spain, the same panel will produce at least 30% more electricity if you mount it in Sevilla rather than in Stuttgart. So, we performed a comparison of several southern European countries including natural & geological data, as well as other information like electricity prices, economic and political data. Spain clearly headed the list, even though at the time everybody was extremely critical about solar in Spain, as they just had retroactively canceled their feed-in-tariffs, which was a major threat for the whole sector - and still is. But as we were planning to build 'grid parity' anyway, which obviously means 'no subsidies', we were not so concerned about political interventions.
So, I have to say that we invested in Spain not because, but against the political trend in the country. It was Spain's natural resources, availability of land and grid, the electricity market and the possibilities of performing long term PPAs that were the main attractions.
SolarPower Europe: How did BayWa r.e. decide on the location for the solar project (Southern Spain)?
BO: We started with a scoring model of all potential countries within Europe. The main parameters were radiation, land, grid, regulation (are PPAs possible or not?) and further economic and political data. We selected Spain as our preferred country. In a second phase, we started to search within Spain for a suitable location. In particular regarding radiation, cost and shape of land, and availability of grid - this lead us to Andalusia. The municipality of Alcala de Guadaira was keen to see this project succeed, and we have worked in close partnership with them throughout. So, among several potential sites in the region, the Don Rodrigo location became our favorite.
But the key to Don Rodrigo's commercial success, and the fact that we can implement such a project without state funding, is largely due to the continual improvement of system design and material costs. Combined with the expertise that BayWa r.e has accumulated delivering utility scale projects around the world, it means that largescale subsidy free solar has become a reality.
SolarPower Europe: BayWa r.e. has been active in the corporate renewable PPA market since the beginning of its growth in Europe. How will the corporate sourcing of renewable energy through PPAs support the European energy transition and what does the EU need to do to support PPAs?
BO: Corporations are the new driving force of the renewable energy transition. And, ultimately, PPAs are being driven by underlying market forces. Reducing C02 emissions is a global objective and when that same objective combines with solutions that also drive down energy costs, you create a very powerful attraction. So, many companies are already outrunning the European regulation: to many corporates, reducing carbon footprint is a must and an important target of their business strategy for the coming years. But still, the EU authorities should support this movement by either helping those who become greener on a voluntary basis or by imposing (higher) costs for those who just offload their carbon waste onto the community.
The regulatory framework within a given country will have a significant influence on the PPA or even whether a PPA is the best option. Europe is well positioned to have a more homogeneous approach, but even in the EU we still see different models emerging, which can create any number of regulatory and legal hurdles. This needs to be addressed as a priority by the EU. We have been very active in inputting into the policy recommendations SolarPower Europe has compiled and published via the new RE-Source Platform, which highlights what the EU can do. As a business, BayWa r.e. is also actively working with sector trade organisations and policy makers to find ways to address each of these challenges.