Regional woes spell more trouble for Spain

SPAIN: Continued evidence of the Spanish wind market's demise has come thick and fast this summer as the end-2012 deadline for all new installed capacity looms.

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In July, developers in Catalonia threw in the towel on projects totalling 258MW, while German turbine manufacturer Enercon admitted that a EUR23 million plan for its first Spanish facility was indefinitely on hold. Its problems stem from paralysis in support for wind.

In 2010, developers using Enercon technology won the right to build 543MW of the 2.3GW allocated in a tender in the northern region of Galicia. Enercon's manager director in Spain, Juan Ruiz-Jarabo, said at the time he was hopeful the Spanish government would include the capacity in a new quota beyond 2012, enabling Enercon to carve a bigger market share in Spain, where it has less than 3% of cumulative capacity. However, the centre-left PSOE government at the time failed to set a new capacity quota.

Political failure

Furthermore, PSOE failed to meet its own 2010 deadline to establish a new pay mechanism for wind power when the current one expires at the end of this year. Currently, producers get EUR30/MWh incentive paid in addition to the price achieved on the wholesale market.

On taking the reins of Spain's cash-strapped government in November, the conservative PP party made electricity sector costs a priority concern. It clamped an indefinite and official moratorium on all renewables in January, which the wind sector reckons could be lifted anywhere between 2014 and 2017.

"It's impossible to know just when Galicia will move forward," said Ruiz-Jarabo. Enercon will stick by its clients for as long as it takes, he added. The company maintains the same commitment in the Valencia region, where plans for a tower facility are still awaiting building orders for Enercon clients on a 300MW allocation granted in 2003. The purpose of the eventual Galician facility now depends on how Enercon's other European plans develop. "But it will certainly be dedicated to a major part of turbine manufacturing, like the nacelle and large steel components initially planned and the investment will remain unaltered," said Ruiz-Jarabo.

Enercon's large capital base affords the company such flexibility, said Marc Muhlenbach of consultants IHS Emerging Energy Research (EER). However, it is not certain how much of the capacity currently on hold in Galicia and throughout Spain will actually go forward once the moratorium is lifted, added Muhlenbach.

The government is widely expected to slash pay for new wind capacity generation and plans to clamp a discriminatory 11% new tax on turnover from wind were leaked this summer.

Wind industry association AEE claims the tax would cause many developers to abandon projects. Ruiz-Jarabo admits Galicia's regional government's plans to place an additional local tax on wind do not help, but says his Spanish clients - including national major Enerfin - have good wind resources and are "more capable than most" of staying the course.

Catalonia projects

Meanwhile, nine projects totalling 258MW have been postponed in Catalonia and represent over half that region's 445MW quota allocated in 2009. The local electricity distributor Endesa said it could not give the green light to building new power lines due to the projects' financing difficulties.

Spanish renewables firm Fersa, developer of four of the projects totalling 96.5MW insisted finance difficulties are not to blame, putting it down to slow administrative processing, making the end-2012 deadline impossible to meet. Eolia, also a Spanish renewables company and the developer of the four postponed projects (161MW), declined to comment.

Unfair timing

The case underlines AEE claims that the Spanish quota and deadline system is unfair, as not all project developments face the same timescales. Specific reasons aside, Fersa and Eolia's project postponements are part of what Muhlenbach called "a vicious circle across the wind market supply chain". Doubts regarding returns for new wind generation mean finance takes longer to negotiate, turbine and component contracts are pushed further and further back, as are other agreements, such as power line extensions. AEE said there are 500MW of the 2009 quota that will not meet the deadline.

Enercon, Fersa and Eolia are merely the latest in a long line of companies hit by the Spanish paralysis. Top local turbine manufacturer Gamesa has gone from making 31% of its sales in Spain in 2008 to 13% last year, said Muhlenbach. It has recently closed one nacelle production line in Medina del Campo following a blade factory closure in Alsasua. Competitor Vestas has laid off hundreds of workers in Spain, as has blade manufacturer LM Wind Power.

Developer majors like Gamesa, Iberdrola, EDP and Acciona are focusing increasingly overseas. "That is weakening the domestic supply chain," said Muhlenbach. EER said that when the Spanish market finally gets moving again, it will not get back to its former levels of 2GW annually, but rather it will flatline at around 800MW.

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