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Spain

Threat to tariff met with sharp response -- APPA warns parliament of underachievement on renewables

With Spain's renewables tariff law coming up for its first review at the end of this year, the country's renewables producers association, Asociación de Pequeños Productores Autogeneradores (APPA), has waded into battle. Its initial pre-emptive strikes could hardly have been made at a higher level. First, it made a live appeal before the environment commission of Spain's Senate, responding to an invitation following the release of the government's draft energy infrastructure plan. Second, it repeated the performance in response to a summons from an energy committee of the lower parliamentary chamber.

During both presentations APPA's Manuel de Delás pinned his argument on "flagrant underachievement" of the objectives of Spain's renewable energy plan -- Plan de Fomento -- which gives legal status to the national 12% renewables commitment. He blamed flagging political will brought about by "false notions," such as the belief that wind producers are "raking it in" and that renewables are expensive. Delás said the day conventional power generators internalise their costs -- whether from subsidies or from environmental damage -- renewables become instantly competitive.

"Wind power is a capital intensive business with long term returns," Delás argued. He added that, despite growth being around 6% above Plan de Fomento expectations for 2002, even wind is showing "worrying signs of deceleration," with installed capacity costs on the upturn and grid connection costs "rocketing." Delás reminded senators that the Plan de Fomento establishes minimum objectives and not a final goal. "We have to keep up efforts with what works and give greater impetus to the things that don't work," he later added before the subcommittee in reference to the tariff review.

Spain's tariff

Spain's wind tariff came into force in 1998 as part of 1997's electricity sector law. It establishes a floor and ceiling paid for renewable energy kilowatt hours of 80% and 90% of the pre-tax consumer price paid for electricity. Wind's returns today are set at close to the 90% band. APPA says this is a prime reason for the more than 3000 MW of wind power installed since the establishment of two payback mechanisms for all renewables technologies. Project owners can choose between a guaranteed fixed rate of pay for their production, or a production incentive paid on top of the price achievable in Spain's power pool.

The tariff and the incentive are adjusted annually to ensure that earnings stay within the upper and lower limits for each technology, regardless of which mechanism producers opt for. Those limits are due for review every four years, in accordance with market performance. The worst case scenario for wind as a result of this year's review is if tariffs to hit the 80% floor for the next four years. And this is exactly what APPA aims to prevent.

There are no clear indicators as yet from government on the tariff review, but a recent draft document on electricity and gas infrastructure is giving APPA cause for worry. It proposes spending of EUR 2.7-EUR 3.9 billion on power lines and substations and EUR 3.8-EUR 6.1 billion in gas infrastructure. The spending bias is a result of expectations that gas consumption will rise from 9.7% to 34.2% of Spain's primary energy mix, with around 13,500 MW coming from combined cycle gas plant.

Dirty gas

APPA points out that this would amount to 36.4 million tonnes of CO2. "We should not confuse less dirty with clean," it says. APPA points out that some of Madrid's refuse collection vehicles display the message "This lorry does not pollute, it runs on gas." In the senate Delás also warned of the strategic dangers of gas imports with the reminder that Spain is 74% dependent on external energy supplies.

APPA's reaction to the plan was more tempered, however, by the time of the subcommittee hearing. Here, Delás welcomed the investment in electricity infrastructure. The government is forecasting around 16,000 MW of new cogeneration and renewables by 2011, on top of the 9000 MW of new plant already built, 3500 MW from wind.

Delás did criticise the lack of clear-cut measures to favour and guarantee greater penetration of renewables within the electricity system. APPA has often accused Spain's utilities of obstructing grid access to renewables and warned the subcommittee that within the conventional electricity industry the talk is of a maximum renewables penetration of 5%. Delás wonders whether this is a prediction, a desire or a challenge to the Plan de Fomento's legally binding objective of 12% renewables. Whatever the case, he sees any tariff reduction at the end of the year as a sure way to prove the conventional sector right.

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