New players lead wind additions in Spain

The first of our three part focus on southern European markets looks at Spain where a new generation of developers is taking over

Wind power covered 21.9% of Spain's power consumption in 2020 (pic: REE)
Wind power covered 21.9% of Spain's power consumption in 2020 (pic: REE)

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This is a feature from Windpower Monthly's May 2021 Insight Report. Click here to read the full edition

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Spain saw 1,720MW of new wind capacity connected to the grid in 2020, according to national wind association AEE, 23.32% down on the 2,243MW installed in 2019.

AEE’s 2020 online figure differs from the 1.4GW previously reported for Spain by WindEurope. That figure was based on an earlier report from grid operator REE, which over the past two decades has used a different gauge for registering capacity as officially online.

Regardless of the precise figure, there is a 500-800MW lag against 2019, which is at least partly attributed to the abrupt adjustment to restrictions resulting from the Covid-19 pandemic.

It is also partly due to 2019 marking the release of half a decade of pipeline pressure following the previous conservative People’s Party government’s practical freeze on new capacity in 2013-2018.

Last year’s new build brought the national cumulative total to around 27,480MW at the end of 2020. Spain maintains its fifth position in the global installed wind capacity ranks, behind only China, the US, Germany and India.

What’s more, wind power is now Spain’s top generating technology in terms of installed capacity — followed by combined cycle gas with 26.3GW online — and covered 21.9% of all power consumption last year, second only to nuclear, at 22.2%.

For four consecutive months from December 2020, wind was the top generator, meeting 25.5% of March’s consumption.

But despite this strong performance, “there are still few signs from building on the ground that new capacity in 2021 will top the 1.5GW mark”, says Alberto Ceña, CEO of renewables consultancy Bepte.

That estimate, at best, would mean a nearly 1GW shortfall against the 2.3GW annual average needed to reach the government’s target of 50.3GW of cumulative wind capacity to 2030. Spain needs to install an additional 23GW to reach that goal from where it is now.

Spring awakening

March, however, offered brighter signs, with national wind-turbine sales totalling 552MW that month alone, according to data from Windpower Intelligence, the market monitoring division of Windpower Monthly. Siemens Gamesa Renewable Energy (SGRE) picked up the lion’s share with 320MW.

Whether that pace will continue remains to be seen. Neither AEE nor Bepte are optimistic in the short-term, calling for more proactive intervention from the government to back its own target.

The 50.3GW to 2030 target forms part of Spain’s national climate and energy plan (NCEP) 2020-2030, submitted to the European Commission last year.

Auction timetable

The government’s first concrete step towards its NCEP goal was to launch a 3,034MW renewables power auction on 26 January this year. Wind was allocated 998MW, the rest went to solar PV.

All allocated wind capacity must be online by end-February 2024, although the secretary of state for energy, Sara Aagesen, says she expects deployment to be “even faster”.

The ministry has set a schedule of annual power auctions to 2025, each with a 1.5GW quota for new wind power capacity. The January 2021 auction is, in effect, counted as a delayed auction from 2020. Aagesen has confirmed another 1.5GW auction for wind will take place before the end of 2021.

Plummeting prices

January’s bidding closed with the lowest average prices achieved for wind power in any European auction — €25.31/MWh; well below Spain’s €33.96/MWh national wholesale electricity market price for the full-year 2020. PV prices averaged €24.47/MWh. 

The industry ministry expects the auctions to have a knock-on effect for wind projects falling outside the tenders, making it easier for developers to sign power purchase agreements (PPAs) or to clinch finance for merchant risk projects, which leave investors more exposed to fluctuating electricity market prices.

AEE believes the low power sale prices are viable for a mature market such as Spain, with its large economies of scale and know-how and agrees the auctions will underpin confidence for financers and investors.

Yet, the national wind body points out the combined auctions for 2020-2025 are for just 8.5GW of new capacity, against the 23GW of new capacity needed to 2030.

AEE is asking for additional auctions, or other government backed mechanisms, to ensure the NCEP target is met.  

Sun versus wind

A key concern for AEE is to avoid setting tenders as technology neutral in any extension to the scheduled auctions, as well as for new rounds beyond 2025.

In the January 2021 auction, a 1GW technology-neutral pot was entirely bagged by solar PV, undercutting wind prices all the way. There have been similar results in combined tenders in other countries, including Germany.

AEE insists the focus should not be on the auction price of each technology, but on its broader value.  
Indeed, a major focus of the NCEP is to ensure that a just and equitable transition to a low-carbon society is linked with the creation of jobs and the reinforcement of the social fabric nationwide.

Additional values from wind, such as its contribution to a national strategic industry, GDP and grid services has been vehemently defended at recent wind-sector conferences.

Price wars

Since Spanish wind power gained market momentum in the mid-1990s, it has been linked to locally sourced production facilities.

AEE currently registers turbine and related component facilities with a capacity to produce more than 4GW annually.

Pricing pressure from this year’s low auction prices could pull in the other direction, raising fears over cheaper turbine and component imports from abroad as wind operators tighten belts, according to Ceña.

Even before the dramatic result of the January tender, there was already growing concern that lower prices achieved in Spain’s three previous auctions, in 2016-17, were either pushing turbine orders away from local facilities and towards cheaper suppliers abroad or to large economy-of-scale framework deals with non-local OEMs.

Manufacturer market shares

More than half of last year’s new capacity (see chart, below) — 864MW — comprises turbines from GE, which has no nacelle facility in Spain, although it does have two blade facilities in the country through its subsidiary LM Wind Power.

Meanwhile, Siemens Gamesa, traditionally head and shoulders above the competition in Spain, saw its market share for 2020 installations fall below 50% and closed two blade factories — one in Galicia, the other in Navarra — taking up the production slack at its blade facility in Portugal.  

Development shifts to newcomers

Since the 2016-17 auctions, Spain’s developer base has shifted radically (see chart, below). Spanish oil giant Repsol, a relative newcomer to onshore wind, was top dog for new installed capacity in 2020, after commissioning the 335MW Delta Delta (335MW) OnshoreZaragoza and Teruel, Aragon, Spain, Europe Click to see full details project in Aragón, having acquired it from Forestalia in 2019.

Repsol is now developing the 860MW Delta II Delta II (860MW) OnshoreAragon, Spain, Europe Click to see full details hub in Aragón, bought from Forestalia last year and comprising 26 wind farms due to come online in phases from 2021 to 2023.

Forestalia, an offshoot of the Jorge agro-food family business, had appeared overnight as a key wind player on landing 1.5GW of the 4GW allocated to wind in the 2016-2017 auctions. The company signed a 1.2GW turbine framework deal with GE in 2017.

The second biggest owner of wind capacity connected last year was Danish greenfield fund manager Copenhagen Infrastructure Partners (CIP), with the first 275MW of its 487MW Monegros hub, also acquired from Forestalia and located in Aragón, which emerged as Spain’s top wind region last year (see capacity map).  

Taking a back seat

Over the best part of the past two decades, the country’s top two wind operators, utility Iberdrola and renewables pure player Acciona Energía, have owned around half of the country’s online capacity between them.

However, neither has made any significant wind-power bids in any auction since 2016, preferring either richer pickings in their extensive overseas markets or in the PV market and auctions at home in Spain.  
Nevertheless, the momentum of Iberdrola’s previous development activity brought 145MW online last year. It also has offshore plans.

Another newcomer is Capital Energy, the big winner of the January 2021 auction, with the lion’s share of 620MW. The company signed a 1GW framework deal with GE.

But, unlike Forestalia, which tends to sell its projects on, Capital Energy claims its aim is to become Spain’s top renewables pure player, integrating construction, production and operation. The firm has an 8.5GW renewables portfolio, with grid access permission for 7.1GW of wind, of which 2.2GW is at an advanced stage of development, a company spokesperson told Windpower Monthly.

Meanwhile, with current grid-connection applications exceeding 200GW, according to REE, there are bottlenecks for regional government and transmission system operator permitting — “an additional obstacle to exceeding the 2GW annual mark”, says Ceña.

Big ambitions for floating offshore

The NECP does not yet include a concrete offshore wind objective, although it promises an offshore route map, to be published this year.

AEE estimates 2-3GW of offshore wind in Spain by 2030, mainly using floating platforms, where it sees the country as taking a world lead — largely through necessity given the extreme water depths close to Spanish shores.

To 2050, the association sees 13GW of offshore wind-power within reach. “We aim to reproduce Spain’s onshore wind success offshore,” says AEE director Juan Virgilio.
The Spanish industry is home to two of the global offshore wind giants, Iberdrola and Siemens Gamesa.

First moves offshoreIn February, Iberdrola announced its intention to build a 300MW floating wind farm by as early as 2026, earmarking locations off Galicia, Andalusia and the Canary Islands.

The following month, Bluefloat Energy, a developer backed by US investor Quantum Energy Partners, announced plans for a 1GW floating project 24km off the coast of Girona, Catalonia, in north-east Spain.
Meanwhile, “pilot projects are gathering pace, especially in the Canary Islands” says Ceña.

Indeed, in March, the Canaries regional government approved the first €6 million public investment in its Plocan platform 23km off the coast of Gran Canaria, where it will provide infrastructure and technical and administrative support for an initial 15MW of offshore wind to 2022, with a view to reach 300MW by 2025; most of it floating.

An initial €2.3 million has already been allocated to laying an underwater powerline for Plocan and projects are queuing up, including the 180MW W2Power floating platform.

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