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Adif AV Tenders the Supply of Green Energy for Railway Traction for EUR 1,600 M

Adif AV Tenders the Supply of Green Energy for Railway Traction for EUR 1,600 M
photo: Adif AV/Adif AV Tenders the Supply of Green Energy for Railway Traction for EUR 1,600 M
30 / 11 / 2022

Adif Alta Velocidad has put out to tender the contract for the supply of 'green' or Guarantee of Origin (GoO) renewable electricity for the railway system, i.e., traction electricity for operators, both passenger and freight, for the entire General Interest Railway Network (RFIG).

The budget for the supply contract amounts to 1,600.5 million euros, although the final cost will depend on actual consumption, the bids received the resulting price on the OMIE (Operador del Mercado Ibérico de Energía) wholesale market, and possible price hedging on the OMIP (Operador del Mercado Ibérico-Polo Portugués, which offers a trading platform for energy derivatives) market.

The green energy supply contract will run from April 2023 to December 2025, including a possible extension for an additional maximum period of two years.

The electricity supply points have been distributed in 16 lots, based on proximity criteria to minimize consumption deviations between the points that make up each group and to homogenize market costs. The tender does not include the costs of access to the transmission and distribution networks, which will be managed entirely by Adif AV with the distribution companies.

In 2021, energy consumption for traction usage in the Adif and Adif AV rail network was 2,106 GWh and is expected to rise to 2,414 GWh in 2022 due to the increase in traffic, driven by the liberalization of passenger rail transport, which has promoted the entry of new operators.

New feature: greater management capacity for operators

The main novelty of the new contractual framework is that each railway operator will be able to develop its energy price management strategy, in coordination with Adif AV.

Thus, railway operators may request price hedges for all or part of the energy they plan to consume in a given period (month, quarter, or year), whose closing orders will be managed by Adif AV with the awarded marketer. These hedges will be executed taking the futures market (OMIP) as a reference.

As an example, if an operator plans to consume 1,000 MWh in the high-speed network in January 2023, and assuming that the futures market offers an interesting price at that time, it may request Adif AV to issue such closing order to the energy supplier under the conditions determined by the said railway company. The issuance of this order may be carried out by Adif AV without the need for consensus with the rest of the operators.

The new management model responds to intense work carried out by Adif AV with the railway operators to provide them with greater decision-making and management capacity in one of their main costs and, thus, reinforce the sustainability of the sector and the liberalization process.

To date, with a regulatory context preventing railway companies from going to the electricity market and negotiating prices, it was only possible to close prices on 100% of the consumption for a temporary period of each of the lots in which the tender is distributed. This procedure obliged Adif AV to coordinate the closing order with all the operators operating in the infrastructure (high speed and conventional Iberian gauge and metric gauge network).

In recent months -and on a transitory basis, within the framework of the contract in force-, Adif AV has offered operators the possibility of closing their negotiated prices and, as a result, the price for approximately 42% of consumption on high-speed lines for the period between November 2022 and March 2023 has been fixed.

Negotiated procedure to optimize prices

The negotiated procedure to be initiated by Adif AV with the supply companies will consist of the bidding of a single offer modality - price indexed to the daily market with the possibility of hedging in the OMIP futures market - so that each operator can decide the moment, the amount of energy and the time for price hedging.

Subsequently, Adif AV will select the three most competitive offers and initiate a negotiated process with the bidders to achieve optimum conditions.

Solutions to minimize the impact of the energy crisis

In recent months, Adif AV has kept under permanent analysis formulas to minimize the impact of the energy crisis on railway operators, caused at this juncture by geopolitical conditions and the war in Ukraine.

To this end, it has proposed regulatory changes, among which are the request to extend the term of energy supply contracts to 15 years, by amending the Public Sector Contracts Act, which would allow Adif to manage long-term PPAs; and the elimination of double connections to electrical substations, by authorizing the contracting of a single access tariff in traction electrical substations with more than one connection. The entity has also promoted the elimination of the costs of tolls and charges for supply points destined to the essential railway service; and the consideration of the railway sector within the category of electro-intensive consumers.

Since February 2021, Adif AV has had the advice of an energy expert, which has allowed it to analyze and make decisions, both in the negotiation phase and throughout the term of the contracts, to optimize the energy costs of the railway operators.

With this new tender, aligned with the commitments of the Plan to Combat Climate Change 2018-2030, Adif AV continues to make progress in its contribution to the decarbonization of the railway system, initiated with the supply of electricity with GdOs certificates in 2019.

Source: Adif