Visit windpowermonthlyevents.com for the latest on our upcoming conferences and webcasts

Analysis: Spanish government proposal bad for wind and potentially illegal

SPAIN: The sheer aggressiveness of the Spanish government's draft regulation against renewables in general, and wind power in particular, could also be its weak point due to potentially illegal unfairness.

The ruling will affect all pre-2004 wind farms in Spain
The ruling will affect all pre-2004 wind farms in Spain

The draft, which started a 28-day public consultation on 3 February, threatens to reduce Spain's once roaring wind industry (with nearly 23GW currently online and the country's top generator in 2013) to a minimum. Yet it flies in the face of such basic laws protecting investor security that the wind sector is hoping it will eventually be quashed in court.

Still, the courts can take years to move. For that reason, sector hopes for damage limitation rest on a change of government in the next general election, to take place by autumn 2015. Polls suggest, however, that the election result will be touch and go. Meanwhile, national wind association AEE is calling for EU intervention.

Specifically, the right-wing Popular Party government's proposed regulation states capacity online before 2005 — 8.4GW, or 37% of the cumulative total — has already received reasonable profits and so strips it all of any kind of subsidy. All that capacity will now receive the wholesale power market price only. For most remaining capacity, subsidies are vigorously slashed.

The proposed cuts break a repeatedly stated promise since 1999 to maintain feed-in tariffs for the 20-year lifecycle of wind farms. That promise was aimed at attracting investors at a time when wind was still considered a risky investment.

It is unprecedented and illegal for the state, as the ultimate guarantor of investments, to break such a promise, according to a groundswell of opinion, including that of the opposition Socialist Party. Together with a majority of smaller parties, the Socialists have vowed to annul the new law if returned to office.

The 1,700-page regulation, part of Spain's cash-strapped government's emergency measures to save money, establishes around 1,600 parameters for determining payments to be made for renewables and combined heat and power capacity. It fleshes out a June 2013 law replacing all renewables feed-in tariffs with a remuneration based, instead, on a "reasonable profit" of 7.5% across plant lifecycle.

When the regulation is enforced, there will be newer wind turbines producing less power at low wind sites but receiving higher payments than older ones producing more, said AEE policy director Heikki Willstedt. "it simply favours inefficiency, and you can't earn more by improving plant operations," he said.

"One risk is that other countries copy what Spain is doing," the European Wind Associaiton (EWEA) policy department told Windpower Monthly in a statement. "Already we see renewable-energy support systems being changed or threatened with change, scaring off investors in several countries," it added, citing Poland, Bulgaria and "even Germany".

As Spain's proposed regulation stands, it is too early to determine the exact impact, but "the situation is critical", renewables consultants IHS Emerging Energy Research said. The consequences for older players "could be severe, driving a reduced outlook for future investments and asset sell-offs in a balancing bid", it added.

While developers defer public comment to AEE, many fear they will default on loans. Several confided interest in dismantling turbines for sale on the second-hand market.

For new wind capacity nothing is clear, said Willstedt. EWEA said the regulation will make it very difficult for Spain to reach its 35.75GW EU wind target to 2020. IHS said the only visible capacity is what remains of the Spanish government's last wind quota allocation, in 2012, now at just 177MW.

Renewables critics insist Spanish wind companies flood to Brazil's power auctions and sell generation at market prices lower than those at home. "But Brazil's wind sites produce at least double the power," said Willstedt. Furthermore, Latin American power consumption is booming, compared with a slump in Europe.

Until the new law is overturned, "it is hard to see why a developer would now invest in Spain", Willstedt said. However, he pointed to last year's negotiations for special treatment for Spain's Canary Islands, where fossil-fuel import dependency places electricity market prices at over EUR 200/MWh.

A decree was ready to go forward offering a feed-in tariff for 1.4GW of new wind power on the islands. "If the government was simply interested in saving the electricity system money, the Canaries issue would be resolved already," said Willstedt, underlining the widely held belief in the Popular Party's ideological juxtaposition to renewables and its vested interests in conventional power.

Before commenting please read our rules for commenting on articles.

If you see a comment you find offensive, you can flag it as inappropriate. In the top right-hand corner of an individual comment, you will see 'flag as inappropriate'. Clicking this prompts us to review the comment. For further information see our rules for commenting on articles.

comments powered by Disqus
Only [DAYS_LEFT] days Subscribe Now

Left of your Windpower Monthly free trial

Your free trial Subscribe Now

to Windpower Monthly has expired

Windpower Monthly Events

Search more than 4,500 companies in the Windpower Directory

Latest Jobs