Portugal - Financial bailout is death toll for wind development

PORTUGAL: Portugal's wind market is facing stagnation.

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A moratorium on financial support for new projects came into effect on 1 January to comply with requirements from the European Central Bank, International Monetary Fund and European Commission in return for the country's bailout.

In any case, the market is saturated. "We don't believe that feed-in tariffs will be restored because Portugal already has more than sufficient generating capacity", says renewables sector analyst at Banco Espiritu Santo, Felipe Echeverria. He foresees a period of regulatory stability for the sector. "We understand, from what the government has said, that the necessary changes to remuneration for wind producers have all now been carried out."

This follows a voluntary agreement made between the government and operators of Portugal's older wind farms, reducing their income by EUR 140 million up to 2020 in return for regulatory stability. But Portuguese wind energy association APREN believes that the regulatory climate is not stable enough to attract investment. A new law permits development of new capacity under a market regime. However, regulations determining how the law will be implemented have yet to be drawn up by the government, creating ongoing investor uncertainty, says APREN.

The majority of installations in 2013 will come from projects auctioned in 2006. The ENEOP consortium, which includes manufacturer Enercon and utility EDP, should be able to obtain sufficient finance to complete installation of 1.2GW by 2014, Echeverria believes. The consortium has now installed 956MW and it predicts a further 154MW will be installed in 2013 and the rest in 2014, according to APREN. The association expects 3MW to be installed offshore in 2013 as part of developer EDPR's Wind Float offshore project.

portugal capacity piePortugal now has 4.4GW wind including 2MW offshore. This represents an increase of just 119MW, or 2.5%, last year. This compares with an increase of 438MW, or 11.35%, in 2011. In 2012, wind generation grew by 11% and accounted for 20.4% of total electricity consumption, according to grid operator REN.

Last year, the central government also radically reduced the country's 2020 windpower target under the European Renewable Energy directive from 8.5GW to 5.3GW. It argued that electricity demand projections made before the economic crisis were inflated so the generating sector would be over-capacity if it stuck to the original targets.

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