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Market concept hits subsidy barrier -- Wind shut out from Spanish utility's trade of green power

A major Spanish utility is offering all customers, from industrial to domestic users, the option to buy 100% renewables certified electricity. Because it receives a subsidy, wind power is not part of the package. The utility, which is selling green tagged electricity with a 5% surcharge, has already launched a television advertising campaign to corner green-minded customers.

Spanish utility Iberdrola is now offering all customers, from industrial to domestic users, the option to buy 100% renewables certified electricity. Because it receives a subsidy, wind power is not part of the package (box). The utility, which is selling green tagged electricity with a 5% surcharge, has already launched a television advertising campaign to corner green minded customers. Earlier this year it closed its third Renewable Energy Certificate (REC) deal with a Spanish municipal authority and clinched two REC deals abroad.

But while the press and even some government officials are hailing the growth of renewables certificate trading in Spain, the country looks further than ever from implementing a true system of negotiable green credits as an alternative to its fixed renewables tariff. Iberdrola declines to name the price of any of its deals. According to a member of RECS International, this is probably because the price is only symbolic.

The government, meantime, has put forward draft legislation for regulating the guarantee of origin of renewables generation -- a necessary first step to green power trade. All EU countries must comply with a directive calling for such guarantees by 2004.

RECS International comprises 87 companies from all over Europe. It was set up in 2001 in the expectation that the EU was going to push for a pan-European green certificate trading system as part of its call to harmonise renewables subsidy systems by 2007. Spanish RECS International members initially saw a certificates market as a probable future alternative to the national renewables subsidies in force in Spain. There has since been an about turn, with widespread doubts regarding EU support for RECs.

No point

Furthermore, RECS International was born of the idea of selling certificates to countries with a mandatory renewables obligation, such as in Britain and Italy. Both these countries, however, stipulate the obligation to be for home grown renewables, thus depriving RECS International members of large potential customers. "There's no point buying certificates from abroad if they don't count in your renewables portfolio," says one RECS member. In all, the general feeling is that the main function of RECS International now is to use the guarantee of origin mechanisms it has established for renewables, says Manuel Bustos of Spain's Asociación de Productores de Energías Renovables (APPA).

Spanish utility members of RECS International are pushing to include wind power as a tradable item. All wind power in Spain -- most of it produced by the utilities -- is paid at a fixed rate determined by government. At its inception, RECS International had prohibited the sale of renewables certificates associated with subsidised generation to prevent utilities from selling the same kilowatt-hours twice, once via the certificate and then the subsidy. Iberdrola's REC deals this year have all been associated with non-subsidised hydropower.

If RECS International eventually allows the inclusion of Spanish subsidised wind, this power will merely be sold at close to face value as green-tagged electricity, according to organisation insiders. Such sales will polish up the green image of both the customer and the utility, especially for Iberdrola, which has over 1400 MW of wind online.

National model

The Spanish government's draft legislation will give more weight to green tagging, as it establishes a publicly endorsed model, rather than RECS International's internal private model. The main question is whether there will be demand for green electricity generated from wind and other renewables or whether Iberdrola's recent deals have been a flash in the pan.

A recent campaign from powerful ecologist organisations (including Greenpeace and the World Wildlife Fund), consumer organisations and Spain's leading trade unions urges citizens to mass mail government offices with demands that the origin of all electricity be identified in consumer electricity bills. Domestic electricity customers have been allowed to choose their supplier since the beginning of 2003, so far with negligible effect on distributor client lists.

There's little consumer awareness culture in Spain," says Bustos. He points to a survey by the European Commission's Eurobarometer, in which just 30% of Spaniards say they are prepared to pay 5-10% more for clean electricity. Spain's rating on consumer willingness to pay more for green power is not the lowest, but many other Europeans countries are more positively inclined. By July 2004, though, Spain will have to comply with a recent EU agreement that a certificate of origin accompanies all power generation. The measure represents an important boost to Spanish renewables, says Bustos.

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