IEEE Power & Energy Magazine - November/December 2020 - 65

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fuel. The fixed cost includes the
financial return on investment at
the generating unit, which had
been 6.503% since 2014 but was
revised by the National Commission for Markets and Competence (CNMC) and reduced
to 5.58% for six years beginning
in 2020. This reduction is mostly
attributed to the expected longterm low money rate of interest
in the market.
Of course, the reference cost
that wind and solar energy must
compete against is the variable
cost of electricity since renewable generation is considered to
offer no firm capacity to the system. The wind-hydropower plant
El Hierro (described in the "El
Hierro: The Highest Penetration
of Renewable Electricity in the
Canary Islands" section) is considered, but it does not offer firm
capacity to the system throughout
the year because of seasonality,
and, consequently, it has a fixedcost compensation that differs
from that of the thermal units. To
check the real cost for each unit,
Red Eléctrica de España (REE),
the national system operator
and the owner of the transmission grid, periodically audits the facilities in situ to adjust the curve that relates the thermal content of the fuel consumed to the power produced. Moreover, any company that
manages conventional power units must hold public auctions for the acquisition of the
fuel, and the purchasing invoices must be submitted to the CNMC for monthly liquidations of the generating costs. Indeed, the price of the diesel and the heavy oil used to
produce conventional megawatt hours is known and varies
depending on the island (Table 2).
To plan the conventional power units serving electricity to
the grid, REE gives daily dispatch orders to the different thermal units, based on a specific regulation that prioritizes the
economic merits and through which each insular power grid
acts as a unique node. A secondary dispatch directive considers
security aspects for injecting renewable energy up to the integration limit. Finally, a tertiary dispatch instruction evaluates
restrictions. All these dispatch orders can be adjusted, if necessary. Moreover, some Spanish grid codes have been adapted
to the Canaries' insular power grids. One important code to be
cited is P.O. 12.2, which discusses installations connected to the
transmission grid and generating equipment. The code also establishes the operating range
within which the grid operator must maintain the power system (Table 3). Because the total
cost of electricity produced by the conventional units in the Canaries (163.51 €/MWh in 2018)
is much higher than in mainland Spain (64.4 €/MWh in 2018), the difference is 50% financed

Achieving 100%
Renewable Energy
in the Canary Islands

november/december 2020

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IEEE Power & Energy Magazine - November/December 2020

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