Impact of Spanish Offshore Wind Generation in the Iberian Electricity Market: Potential Savings and Policy Implications

Abstract

The European Union considers that offshore wind power will play a key role in making the EU the first climate-neutral continent by 2050. Currently, the potential of offshore wind energy is still untapped in Spain. Furthermore, the characteristics of the coastline in Spain require floating technology, making it challenging to install wind farms due to their current high cost. This work seeks to quantify the impact that Spanish offshore wind energy would have on the Iberian electricity market. Several offshore wind scenarios are evaluated by combining available information in relation to areas suitable for installing wind farms and wind resource data. The impact on the day-ahead electricity market has been obtained by reproducing the market, including these new offshore wind generation scenarios. The introduction of this renewable energy results in a market cost reduction in what is known as the merit-order effect. According to our estimates, for each MWh of offshore wind energy introduced in the market, there would be a market cost reduction of 45 €. These savings can serve as a reference for regulators to adjust their policy framework to boost floating wind offshore generation.