Big question mark over Iberdrola Greek investment

GREECE: With Greece's economy on its knees, Spanish utility Iberdrola's plan to invest EUR1.8 billion in building 706MW of wind power across three Greek islands, together with a submarine power link to the mainland, has raised eyebrows.

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Reactions to the so-called Aegean link are mainly cautious, not helped by Iberdrola's vagueness on detail. The company claims the project to be the biggest combined renewables development and island power link worldwide. It says the project will "reactivate local economies" through taxes, a 3% annual wind-power levy on billings and the creation of jobs.

Rokas, Iberdrola's Greek affiliate, has already delivered the environmental impact assessment (EIA) and the power interconnection - which accounts for 40% (EUR720 million) of the total estimated investment - has received broad approval from Greece's regulatory authority for energy.

The project plans 306MW on the island of Lesbos, 150MW on Quios and 250MW on Limnos. The turbine supplier remains open. Overall, the company will lay 400 kilometres of powerlines across the three islands and seabed, the longest connecting all to the mainland along a 267-kilometre line from Lesbos. Building, planned to start in 2014, is expected to be completed by 2017.

Beyond that, detail is scarce. Despite over a year of development, Iberdrola-Rokas could offer no indication of how the project will be financed. "It's hard to be optimistic given Greece's difficulties," said Eduard Sala de Vedruna, a senior analyst at IHS Emerging Energy Research. "Still, the investment is reasonable and just might interest multilateral finance", he added.

Another consultant, requesting anonymity, said that in less trying times, the project would be "unquestionably attractive". He points out that unlinked Mediterranean islands are paying around EUR170/MWh for wholesale electricity due to high dependency on subsidised oil-fired generation.

Wind in Greece costs around half that, with a EUR90/MWh feed-in tariff on the islands (EUR80/MWh on the mainland). He said the islands' wind capacity factors, at 30-35%, are well above European averages. Yet, with Greece's continued existence in the Eurozone now in question and austerity measures rife, the future of the wind feed-in tariff is far from clear for investors.

However, Greece is not attractive only to Iberdrola-Rokas, which operates 257MW there. The country installed 424MW last year, a quarter of its 1.63GW cumulative total. Spanish competitor Acciona has permits on 522MW planned for the Vermio Mountains, pending EIA approval. Chinese turbine manufacturer Sinovel and Greece's Public Power Corporation are discussing building 200MW in the north of the country.

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