Opposition grows to Spanish incentive cuts plans

SPAIN: Opposition to the Spanish government's proposals to cut support for wind energy has spread beyond the wind sector but could be toothless in the run up to general elections in November.

The wind industry fears the government will pass the austerity measure unhindered in a last-minute rush to rubberstamp outstanding policy.

Hope of an eleventh-hour political intervention to halt the draft is not entirely lost, however. The incumbent governing party, the Partido Socialista Obrero Espanol, has elected a new prime-ministerial candidate, Alfredo Rubalcaba, who is reportedly against the draft regulation. However, Rubalcaba's office is withholding comment ahead of a 7 November televised candidate debate.

Meanwhile, the conservative Partido Popular opposition has not commented either on the draft or on energy policy.

Hanging in the balance is Spain's once-roaring wind market, which will enter a "de facto moratorium" if the regulation is approved unamended, Spanish wind association, Asociacion Empresarial Eolica (AEE), claimed.

The draft cuts the eligibility period for the production incentive from 20 years to 12 for wind energy that comes online after 2012. Incentives will only be paid for the equivalent of 1,500 hours of annual operation at full capacity. Currently, there is no limit.

Binding commitment

For post-2012 capacity, the document sets a 35% cut in the production incentive. The incentive, currently at EUR30.1/MWh, is paid on top of the wholesale electricity market price.

The proposed rate, reviewed annually, will slide further downward for all capacity built after 2012 if wind developers exceed a 1.4GW annual quota on new build.

The industry ministry points out that the rate will rise if the quota is not met. It also insists Spain's binding commitment to the European Union to reach 35GW of installed capacity by 2020 - up from 21GW by the end of 2010 - provides assurances for wind investors and financers.

Not so, says AEE. Not only are the kick-off incentive levels nonviable but subsequent reviews could push them lower. Only 55MW will go up by 2015 if the regulation is passed, the association claimed.

False alarm

But the wind sector has cried wolf before, argue sources close to the industry ministry. Indeed, the sector had complained about the existing regulation before it was approved in 2004, claiming that it would slam the brakes on new development. But around 12GW has entered service since.

Nevertheless, the situation now is markedly different, with opposition to the draft snowballing. A group of national trade unions, including the top two - general workers' unions CCOO and UGT - and a collection of environmental groups, including Greenpeace, have each signed statements rejecting the draft.

They joined AEE in saying the proposal would cost nearly half the existing 36,000 workforce, with those left working in maintenance and exports.

All but three of Spain's 17 regional governments have strong wind-industry stakes and promise to fight the regulation. The wind industry and its supporters have implicitly threatened national court action, arguing the draft contravenes a 1997 law demanding "reasonable returns" on renewables investment.