Spain's structural faults

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This month's adjustment of Spain's wind power tariff will lay the market foundation for the coming four years (page 38). But although important, the issue of the tariff should not monopolise the debate on the industry's future to the extent it currently does. Other areas of policy are crying out for just as much attention -- and reform. The Spanish wind industry, however, steams on regardless in true Titanic style, smug in the knowledge of its environmental credentials and its 700 MW of annual development over the past three years -- and apparently blind to the market's serious structural flaws.

The catastrophe of a foundering far more recent than that of the Titanic -- the break-up of the oil tanker Prestige which spilled thousands of litres of crude onto the Spanish Atlantic coast last month -- will undoubtedly strengthen the wind industry's environmental hand. But in continuing to blindly believe that the mere act of flying a big green flag will provide permanent protection from economic reality, the industry is ignoring the existence of embedded structural defects just as grave as those which broke-up the Prestige.

Spain's wind industry has needed major reform right from the beginning of the boom in 1998. Devolution in 1979 put many areas of regulation into the hands of the autonomous regions, and wind development was added. There is no single wind market. Instead, about a dozen radically different regional market policies control development, ranging from strongly interventionist public-tender models with tightly controlled wind plant siting, to loose guidelines based on little more than environmental exclusion zones. The result has been to complicate procedures for developers and waste administrative resources -- adding unnecessary cost. For good or for evil, it has also concentrated development into the hands of a powerful few, giving rise to industry rumblings of unfair practices when regional governments pick who should develop what and where, with whispers of corruption too. Few foreign companies who have attempted to penetrate this peculiarly Spanish way of getting things done have had much success in injecting healthy outside competition.

This is not to undermine the pioneering role of Spain's regional wind policies in getting wind power off the ground. By creating strong local market structures which cater to local needs and concerns, development has been fast and furious, and without causing the kind of fierce anti-wind power backlash seen in some areas of northern Europe. But on the downside, the manufacturing base has suffered from fragmentation. Keen to create economic activity in far flung regions, governments have insisted that turbines and other hardware be manufactured locally. There are over 40 facilities for the production of turbines and components across the country, spreading the industry's manufacturing resources painfully thin.

Adapting production to new technological developments has been made more difficult as a result -- and again more costly. Technology improvements are at last coming thick and fast, but megawatt scale turbines have been much slower to take off in Spain than elsewhere. What's more, the use of turbines adapted to the specific wind characteristics of sites -- part and parcel of wind development in other countries -- has only recently taken on commercial importance. Until recently, exactly the same models have been used in dramatically varying wind conditions -- from strong constant winds in the mountain peaks of Navarra, to the slower less dense winds in the central high plateau. Least cost development has not played much of a role, it seems.

RIDDLED by market intervention

Some of the blame for such a cavalier attitude to wind economics in Spain appears to lie in the more interventionist regional policies. Before permitting projects, these policies require guarantees of their viability, including assurances of developer solvency. As a result, large corporations with deep pockets, especially the mighty utilities, dominate the market -- and dynamic competition is squeezed out.

Spain's four utilities also control electricity distribution. Smaller developers often suspect foul play when utility-owned wind power developers gain grid access -- and they do not. Electricity distributors are not obliged to provide a technical explanation for refusing grid connection to a hapless applicant. National regulation on third party access to the grid, to make connection procedures fair and transparent, is still sadly lacking. Relations with distributors could be much improved if Spanish turbine manufacturers seriously looked at incorporating technology that can add, rather than detract, from grid stability. If there is one aspect that unites the power industry in its criticism of wind it is the problem of maintaining stable supplies on a local network with a large preponderance of wind turbines.

Spain's recent energy infrastructure bill sets, for the first time, a cap on installed wind capacity in Spain, at 13,000 MW for 2011. Although the limit is not set in stone, any future amendment will largely depend on wind's grid performance from now on. "Market mechanisms should be introduced to promote grid stability," says Jose Maria Marcos of utility association Unesa. The wind sector should push for such mechanisms if it wants untrammelled growth. It should also lobby for policy changes to stop detrimental market fragmentation, and for rules which make grid-access less of a lottery. Simply pursuing a guaranteed tariff as its main lobbying strategy is not the best way of raising that 13,000 MW cap.

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