Lithuanian wind power association: auction results indicate maturity of the sector

To our knowledge, this is the first case in Europe in an onshore renewable energy auction for a developer to win with a zero bid. At the same time, however, it is important to note that this trend will not necessarily persist in subsequent auctions.

The renewable energy sector is changing rapidly, including in Lithuania. Technology is constantly evolving and becoming more efficient, which ensures a competitive and attractive price for the electricity produced. Thus, such results primarily indicate the maturity of the sector.

Such results signal a great deal of competition between developers of renewable energy projects operating in Lithuania as well as possibly more reserved return expectations and willing to take higher risk. This auction took place after a long investment gap, the market is hungry, and existing available grid capacity s limited, so we can consider such outcome as a result of the companies competing for network access rather than a financial supplement.

Based on the results of this auction, however, it would be difficult to predict further ones. European experience shows that renewable energy projects (especially when it comes to wind) are developed without subsidies through corporate power purchase agreements between large developers and large businesses that use large amounts of electricity in their operations. Therefore, the continued success of subsidy free projects will greatly depend on the availability of PPA on the market, which at the present moment is rather limited. It is getting more important than ever to incentivize the consumer who opts for clean electricity, rather then the developer.

Nevertheless, state support remains significant for smaller producers unable to develop large projects and thus secure good PPA deals.

– Aistis Radavičius, Director of Lithuanian Wind Power Association

Additional information: recap on the auction

On January 16th, 2020, Lithuanian State Energy Regulatory Council (VERT) announced the winner of the first renewable technology neutral auction – a company called UAB WINDFARM AKMENĖ ONE.

WINDFARM AKMENĖ ONE UAB offered a price premium of 0 Eur / MWh and a maximum annual amount of electricity production, thus it will receive the entire 300 GWh quota.

According to the Law on Renewable Energy, the winner of the auction will enjoy the priority dispatch of all of the electricity produced for 12 years from the start of electricity generation.

A total of 7 bidders participated in the auction (8 bidders submitted but one bidder did not qualify). Three bidders offered a price premium of 0 EUR / MWh on top of the electricity market price, while the other bids were 0.56 EUR / MWh, 1.81 EUR / MWh, 1.91 EUR / MWh and 3.86 EUR / MWh ( maximum possible premium was set to be 3.86 Eur / MWh).

Participants who offered the lowest price premium (0 Eur / MWh) went to the second round. Given that the price offer offered by all of the three participants was the same, the winner was announced the participant with the highest annual production of electricity.