The era of subsidies for wind and solar may be ending far too soon

Last August, solar developers entered an auction to sell power into the Portuguese electricity grid. And many planned to lose money on every megawatt. One of the winning bidders, Spanish solar firm Enerland, offered to sell electricity for €11.14 (US$13.12) per megawatt-hour (MWh), one of the lowest auctioned electricity prices in history. One megawatt hour is slightly more than the average home in the US consumes per month. 

Enerland and other bidders are selling Portugal energy at prices as much as five-times lower (pdf) than the cost to generate it, estimates Bloomberg New Energy Finance (BNEF). But they are not throwing their money away. They’re betting the superior economics of solar power, and a coveted connection to the country’s crowded electricity grid, will cover any losses over the first 15 years (solar facilities are expected to last about 40 years). After that period, they can sell their power at prevailing market rates (now more than $50/Mwh), and pocket any difference as profits. Their grid connection never expires. 

This “quite remarkable” result, as João Galamba, Portugal’s secretary of state for energy put it, hints at a new future of renewables. Developers are willing to pay big money to sell cheap power into the grid. As renewable energy prices drop even further, says Jenny Chase, who leads solar analysis for BNEF, developers will find innovative ways to bring wholesale electricity prices even lower and return those savings to the grid.

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