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Portugal

Portugal

Deal sees producers sacrifice income in return for stability

PORTUGAL: A deal between Portuguese wind producers and the government on support for wind power looks like it will benefit both sides, after months of wrangling.

Wind producers, already hit by a freeze on subsidies for new projects, have accepted a cut in income of EUR140 million in return for a guarantee of regulatory stability up to 2027. The agreement covers around 70% of installed capacity; the roughly 3GW that receives the EUR110/MWh tariff set in 2005.

The share price of the developer and operator EDP Renovaveis, which can be seen as a bellwether for the Portuguese wind market due to its significant market share, has risen 18% to EUR3.57 since the agreement was made public on 31 August.

The deal will see producers pay an annual fee of EUR6,000/MW into the national electricity system for the next eight years to defray the cost to consumers of renewable price support.

Portuguese renewables association APREN said that although the deal involves sacrifices for wind promoters, it reinforces Portugal's credibility as a country that respects its commitments and provides regulatory stability.

Portugal has a commitment to make electricity generation more financially sustainable in return for emergency financing from the troika (International Monetary Fund, European Investment Bank and European Commission).

A government spokesman said the agreement will give "immediate results" and that, combined with previous measures to reduce co-generating costs and to lower payments to conventional generators, it fulfils the troika commitment.

When the 2005 tariff regime runs out in 2020, it will be replaced by a cap-and-floor system guaranteeing between EUR56 and EUR66/MWh at today's prices. This will operate up to 2025 or 2027.

The remaining 30% of Portugal's wind capacity is not affected, including the 1.1GW being developed by the ENEOP consortium, which attracts a lower tariff.

The European Wind Energy Association (EWEA) described the deal as a welcome development in Portugal's specific situation. But a spokesman warned: "It shouldn't be considered a potential blueprint to be used by other member states to deal with the consequences of the economic downturn."

A Spanish wind industry source said: "The agreement could not be repeated in Spain because of the number and disparity of producers in the Spanish industry."

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