Subsidy moratorium may last until 2017

SPAIN: A recently imposed moratorium on power-sale subsidies for any renewable-energy project coming online after the end of this year may last until 2017, according to a proposal from Spain's electricity regulator.

The suggestion has sparked fury from the country's ailing wind industry, which has lost faith in industry minister Jose Manuel Soria.

A government decree issued in January, drawn up without the sector's knowledge, introduced the moratorium. It said this was temporary but did not put a time frame on it. Ostensibly, the measure is designed to offer the Spanish government breathing space to tackle a EUR24 billion power-sector deficit that developed as a result of a 1998 anti-inflation law forbidding energy-supply companies from raising consumer electricity prices by more than 2% a year.

Coinciding with introduction of the decree, Spain's cash-strapped conservative government commissioned energy regulator Comision Nacional de Energia (CNE) to come up with deficit-slashing proposals.

CNE's report picks out onshore wind "as the most competitive" renewable energy technology, predicting that it will require reduced or even no subsidy "towards the end of the decade", depending on how much electricity prices rise and how substantially onshore wind development costs fall.

By maintaining the moratorium until 2017, CNE argues that onshore wind will be encouraged to compete against conventional power entirely, or almost entirely, without financial support from the government.

Industry in decline

Such a policy will destroy the country's wind-manufacturing industry and make it reliant on imports, argues wind trade association Asociation Empresarial Eolica (AEE). The association points out that Spain's once world-leading wind industry has been suffering since 2009, when the socialist government put a cap on new wind capacity to be built to end-2012.

AEE estimates that there is little more than 700MW of new licensed capacity left to build - a far cry from the 2,150MW annual average installed during the period between 2004 and 2009.

"With no visibility beyond 2012, banks have long since stopped financing new projects," said Heikki Willstedt, AEE's policy co-ordinator. The Spanish wind sector has lost 10,000 jobs since 2009 and, with factory closures rife, the industry claims adopting the CNE proposal would put almost all of the 30,000 remaining jobs on the line.

In response to the furore about CNE's suggestion to keep the subsidy moratorium until 2017, industry minister Jose Manuel Soria issued a statement saying that CNE's report "contained proposals that would not be adopted". He insisted the report was "just one other element of analysis" and said he regretted the shockwaves it had produced.

However, Soria did not specify which proposals were not acceptable and the wind sector remains suspicious. "Soria just wants to keep the whole thing quiet, as he did when preparing the moratorium decree," said one wind developer. Like many Spanish wind-energy insiders, the developer believes the industry minister has an unspoken anti-renewables agenda, pointing to a January statement by Soria that described Spain's existing renewables capacity as too large and arguing that the country is already "eight years ahead" of most European countries.

The wind industry disagrees, emphasising Spain's legally binding commitment to reach 35.75GW of cumulative wind capacity by 2020, which represents a 65% increase on Spain's 21.67GW capacity at the end of 2011. In addition, the wind industry questions Soria's insistence that subsidies for the country's coal industry should be maintained "at all costs".

CNE's report also proposes auctioning new wind-capacity licences to developers that offer the lowest power sale price. This would further undermine the likelihood of growth in new installed capacity, AEE said. In countries that use auctions "the capacity finally installed falls considerably below the capacity originally allocated", said AEE. This is because developers cut power prices to such an extent that they cannot win financing to build their planned projects.

In response to a CNE proposal to revise established incentives, AEE members have threatened court action if there is any retrospective tampering with support for existing capacity.

Aside from its opposition to retrospective reductions in financial support, AEE said it is "willing to discuss any new scenario with the government". However, Soria has declined to meet with the wind sector. "There was a meeting with the director general of energy, but he insisted there would be no negotiations until the road to tackling the deficit was clearer," according to an AEE spokesman.