Spain

Spain

Spain settles down to steady growth

The policy uncertainty that spurred last year's wind power development rush in Spain is over. A revised regulatory structure is providing steady and confident industry growth and the government's 29 GW target, half of Europe's total wind power to date, looks well within reach

At 16 GW, wind power in Spain has become the country's third biggest generating technology in terms of installed capacity, representing 16.4% of all plant in operation. Only large hydro and combined cycle gas have more online (table next page). In the first six months of 2008, just over 10% of national demand for electricity was provided by wind plant, says national wind group Asociación Empresarial (AEE), and spot penetration levels have been above 40%. "We are fast becoming the norm, while so-called conventional generation is on the way to becoming the special case," says Fernando Ferrando of the renewables wing of utility Endesa, one of Europe's biggest coal burners.

A robust domestic market, providing stable purchase prices for wind produced electricity under a market structure targeting 29 GW of wind power by 2016, is the key to Spanish wind industry success, both at home and overseas. The country harbours two of the world's top three wind power owners, Iberdrola and Acciona, and the third and seventh largest wind turbine suppliers internationally, Gamesa and Acciona Wind Power.

Based on current growth trends (table next page), the 29 GW objective is well within reach, says AEE. It claims Spain put up 3522 MW in 2007, an all-time annual record for any European country, though the figure is disputed by sources outside Spain. In its World Market Update report, Denmark's BTM says it can verify only 3100 MW for 2007. This year AEE is forecasting 1500 MW of new wind capacity, based on the 700 MW it reports as newly installed in the first six months. That would put the annual average for the past two years at 2500 MW, more than enough to reach the 29 GW target on time. A slight slow down is expected, however. AEE forecasts 2000 MW annually from 2009 to 2020.

Helping push up penetration levels is the newly positive attitude of transmission system operator Red Eléctrica de España (REE). Dealing with wind in practice has convinced REE that a stable and secure electricity supply can be maintained economically, even with a high penetration of wind power. Now REE is "working proactively" to meet the renewed national wind objective, says the organisation's president, Luis Atienza.

Integration leader

Following five years' collaboration between the system operator and AEE, "Spain has become an international reference for integrating wind," says Atienza. All wind farms are equipped for centralised dispatch and control and all turbines must be able to ride through momentary dips in grid voltage, so they can contribute to grid stabilisation rather than exacerbate any problems. Since January this year, real-time monitoring has allowed for emergency override control of wind farm output by REE. "Only Germany and Denmark come close, with voluntary ride through and dispatch control schemes in some zones," says AEE's Alberto Ceña of the level of control.

Despite REE's demands for the fitting of sophisticated control equipment to each and every turbine, raising the cost of wind plant, the government this year reduced its subsidy of wind power purchase prices. Even so, prices are still high enough for viable wind plant operation, says Ceña, providing that strict professionalism and optimisation of resources and technology are applied.

A production incentive subsidy has been in place since 2004 and is added to the power purchase price, which is based on average wholesale prices of electricity across Spain. An alternative subsidy, offering fixed purchase prices for wind power, is also on offer and currently set at EUR 73.5/MWh. Wind farm owners can choose between the two subsidy systems. Few select the fixed price alternative, which, while offering security, gives a lower return than the production incentive plus wholesale market price.

All power sold through the wholesale market, however, must be accompanied by generation forecasts 24 hours in advance of scheduled delivery to help REE keep the power system stable. For wind capacity connected before January 1, 2008, the production incentive is EUR 38/MWh, index linked to inflation and guaranteed no matter how high wholesale purchase prices go. But for new capacity connected after that, the incentive is 23% lower, at EUR 30/MWh. Neither it is guaranteed: the total purchase price for wind power is capped at EUR 87/MWh.

In practice, when the wholesale price goes above EUR 57/MWh, the incentive is reduced in steps to keep purchase prices at the EUR 87/MWh cap. Once market prices hit the cap, the incentive disappears. Operators briefly experienced a period with no production incentive earlier this year when wholesale prices soared in reaction to rising fossil fuel prices and hydro power shortages. In effect, Spanish wind power was competing unsubsidised alongside nuclear, coal and gas-fired power.

Aiming for 40 GW

Helping to keep industry expectations high in a rapidly maturing market are a series of wind power goals set separately by the governments of Spain's 17 autonomous regions. Together they total an impressive 41 GW, according to AEE (table), two thirds of Europe's total wind capacity to date. Much of the 41 GW is already sewn into specific regulations, though several gigawatts are still being debated by some regional governments. AEE believes the full volume is attainable by 2020. Central government officials have publicly stated around 40 GW could be reached sometime after 2020, without specifying when.

An ongoing shake-up across many regional markets is taking effect. Seven regions -- a mix of new and veteran wind markets -- have so far called for proposals for nearly 4400 MW of new wind capacity (table). Among them is Andalucía, Spain's fastest growing regional market, which has come alive after a slow decade. Just 500 MW went up across the huge area in the ten years to 2006.

Last month, the Andalucian government was due to publish the winning bidders from a call for proposals to build 500 MW to 2013. Concessions have already been granted for construction of 3500 MW to 2010, after long years of planning new power lines and re-processing applications (Windpower Monthly, April 2008). From that concession, 835 MW went up in 2007 and, by the end of this year, over 2100 MW of new capacity will either be connected or building, according to Carlos Rojo of Andalucia's renewables association, Asociación de Promotores y Productores de Energías Renovables (APREAN). The regional government is considering raising the Andalucian wind power target to nearly 6300 MW by 2020, according to AEE. APREAN is pushing for 7000-8000 MW.

Valencia is plodding towards realisation of its 2300 MW development plan to 2010, long since conceded to five consortiums. Just over 600 MW is connected so far, with a further 600 MW building. The small single-province regions of Asturias and Cantabria in the north have recently lifted moratoriums and are aiming for 1100 MW and 300 MW respectively to 2010. Many developments in both regions are advanced, some going back a decade. The Canary Islands will deliberate on a call to build 440 MW across the archipelago this autumn.

After years of stagnation, Catalonia, with little over 350 MW turning, is finally completing dedicated power lines to connect 700 MW of new wind. With further lines planned or building, regional wind association EolicCat now expects to reach 1500-2000 MW by end-2010.

Spain's top three wind power regions, Castile-La Mancha, Galicia and Castile and León, are all hovering around the 3000-3200 MW mark, having exhausted currently available transmission capacity. Only in Galicia does the pace look likely to pick up again, with the regional government's ongoing negotiations to upgrade power lines enabling a request this year for 2350 MW of new wind power to be online by 2012. The first winning contenders for that call for proposals are expected to be announced by the end of the year.

Galicia continues to insist on linking new megawatts to new local factories and jobs. Similarly, the virgin wind power region of Extremadura will deliberate by the end of 2008 on a call to build 400 MW, requiring developers to provide two jobs for every megawatt. Insiders increasingly agree, however, that Spain's giant wind corporations, now with a global focus, are less prepared to comply with regional demands for even more investment in manufacturing facilities. For the likes of Iberdrola and Acciona or Gamesa and Acciona Windpower, further regional diversification makes little economic sense.

Both Gamesa and its US rival GE Energy, which makes some of its hardware in Spain, have said that regulations demanding benefits for local economies in return for wind farm development concessions have outlived their usefulness. Such demands increase the cost of wind power and get in the way of rationalising domestic and export turbine production and supply. "That's the problem with regional control over wind regulation," says one regional insider, preferring not go public with his views. "It looks like Galicia's government prefers small scale developers prepared to bend backwards to get a foothold. The competitive tender results will tell."

Manufacturer confidence

That Spain's reduced wind power purchase rates are still good enough is being demonstrated by the fervent industry activity. Eozen, a licensee of direct drive technology from Germany's Vensys (recently bought by China's Goldwind), opened a 400 MW facility in the now booming region of Andalucía. India's Suzlon set up office in Madrid, from where it will study the viability of setting up its first European manufacturing facility. German Enercon, which has struggled to reach its tiny 0.6% share of the Spanish wind market, has bounced back with plans for new factories (Windpower Monthly, July 2008).

At the same time, French engineering firm Alstom finalised acquisition of Spain's veteran manufacturer Ecotècnia, with a view to growing the company at home and abroad (Windpower Monthly, June 2008). Gamesa, Spain's biggest manufacturer with over half the market, has also just added new manufacturing capacity at its home base in the Basque Country, despite sales overseas now exceeding its domestic sales.

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