Industry minister Miguel Sebastian has warned of his intention to slash costs across the electricity system, pointing to renewables as a major target. In May he called for wind, solar and other renewables lobbies to suggest cuts. With the imminent deadline of June 30 for proposing a post-2012 pay structure, the wind industry is determined to avoid being tarred with the same brush as solar power, which is its chief rival for the subsidies.
Ignacio Galan, president of wind operator Iberdrola Renovables, claims that wind costs are reasonable, while solar costs are not. He points out that wind and solar each absorbed 16% of the EUR6.1 billon paid to renewables and cogeneration last year as feed-in tariffs and production incentives. Yet solar produced 2% of national electricity while wind generated 14%.
One gigawatt of solar thermoelectric power costs EUR900 million in incentives, while 1GW of photovoltaic (PV) power costs EUR600 million. Yet 1GW of wind power, at EUR70 million, is a reasonable and affordable price, he says.
"We have to ask ourselves if we are prepared to pay for very expensive energy technologies at an early stage of development or if we should wait before investing in them massively until they mature, as is already the case of wind power," says Galan.
Sebastian has said that he is not prepared to pay the cost and is determined that no more deficit will accrue after 2013. There is already a EUR20 billion deficit across that system following the 1999 anti-inflation laws prohibiting increases over 2% a year in consumer electricity billing. This was shouldered by government guarantee and absorbed by the public debt market. Last year, the anti-inflationary mechanism was eradicated and costs will gradually be shifted to ratepayer electricity bills.
Spain's national wind association, Asociacion Empresarial Eolica (AEE), of which Iberdrola is a key member, argues the 19GW of online wind capacity by the end of 2009 exceeded targets set in the 2005-2010 Renewable Energy Plan (PER) by only 13%.
That compares with solar photovoltaic or solar thermoelectric capacity, at 1089% and 368% beyond PER targets, respectively. Furthermore, given this year's slow down following the nine-month freeze on new building permits for renewables projects last year (Windpower Monthly, January 2010), wind should only just overshoot its 20GW target to the end of 2010, as set in the PER. Working close to targets is tantamount to stable growth within budget, according to the wind sector, especially when incentives accrue as deficit. Soaring past targets stretches economic and technical planning and, as is the case of Spain's PV sector, can lead to boom and bust.
The national solar association, Asociacion de la Industria Fotovoltaica, was not available for comment.
Meanwhile, both AEE and the ministry remain tight-lipped on key details of Sebastian's mid-May round of negotiations with the different renewables lobbies. While publicly insisting profits for all renewables will be reasonable, he reportedly advocates forcing wind production back into a fixed feed-in tariff regime, the mechanism that dominated the Spanish wind market up to 2004.
AEE warns any such scheme would seriously damage wind development, as the production incentive mechanism that followed it is not only more profitable, but also the main driver of Spain's wind integration within the electricity grid and system. AEE holds Spain as world leader in wind production programming, wind turbine capacity to ride through sporadic grid faults, and real-time monitoring and emergency override control of all wind plants over 10MW by the national grid operator.
One insider close to AEE negotiators claims the planned feed-in tariff will be EUR0.076/kWh, EUR0.01/kWh less than the minimum price currently achieved on the market.
It also represents a big drop on current wind power sales on the wholesale electricity market. Under existing rules, capacity online by 2007 receives a EUR0.038/kWh index-linked production incentive, paid in addition to the constantly varying hourly wholesale market price, regardless of how high that price goes.
Capacity connecting from 2008 receives the same incentive but is capped at EUR0.087/kWh.
The ministry's press office refuses to discuss rumours, but points out that 2010 was scheduled for designing a new renewables pay scheme to come in after 2012. "The ministry has been analysing the situation for over a year and we are still working on it," it says.
The wind industry's main solace rests with a government document sent to the European Commission in late December outlining a provisional 2011-2020 PER to meet Spain's 20% renewables obligation under the EU renewables directive. The document sets a cumulative wind target of 40GW to 2020. Exactly what incentives will be in place to drive the remaining 19GW remains to be seen.