Distorted focus as utilities steal limelight

The wind industry remains uneasy about the role of Spain's utilities as major wind power developers, especially when they strive to give the impression that they alone are leading the Spanish wind rush into the new millenium. This article documents recent developments in this area, and views on it from Spain's wind insiders.

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Wind arrived firmly on the Spanish business map last month with the financial daily newspaper Cinco D’as dedicating a two page spread to the frantic pace of wind plant development in the country. The article contributed to a wave of press interest in Spain, including a headline announcing the biggest wind farm in the world.

The utilities were quick to pick up on the public relations value of the headlines and used the opportunity to capitalise on their green image by making much of their involvement. Indeed, with private developers keeping their cards close to their chests while awaiting regional government approval of a large number of projects, the impression given by the newspaper reports is of utilities leading Spain's wind rush. The involvement of Iberdrola, Spain's electricity giant, in the massive 112 MW Higueruela wind farm in Albacete-with another 288 MW to come before 2002 (Windpower Monthly, September 1999)-received special attention.

For Spain's wind insiders, however, the concentration on utility activities resulted in a distorted though still welcome public focus on wind. The press reports also threw into relief the tricky issue of whether massive utility involvement is a plus or a minus for wind power. Some are voicing fears that the big giants of the power world could elbow out more dynamic and commercially oriented private sector developers.

Antonio Mart’nez, head of Ecotècnia, one of the four main manufacturers of Spanish wind technology, nevertheless still hails the role of the utilities as "a contributory factor to Spain's wind boom, and a desirable one," adding that "the lack of such involvement in the French and British markets, for example, is the main reason for their poor wind performance." But he does not agree with Cinco D’as' estimation of the utilities' dominant role.

Mart’nez especially takes issue with the article when it explicitly states: "Given the push that Europe is giving this source of energy and its scope for profitable business, the Spanish electricity companies, mainly, have opted for a strong commitment to wind power." He says the private sector is just as involved, including sector giants such as EHN, CESA, CEASA and Ecotècnia itself. In fact, EHN, which is based in Navarra, Spain's most productive region in wind power, actually owns half of Energ’as E—licas Europeas (EEE), the developer of the Higueruela wind farm.

Mixed cocktail

The Higueruela model of joint utility and private developer involvement is not new for wind power development in Spain, though this healthy mix of large and small within the sector falls outside Cinco Dias' focus. Instead, the newspaper's concentration on utility activities includes a detailed look at Union Fenosa Energ’as Especiales (UFEE), the renewables wing of large utility Union Fenosa. UFEE is currently installing 165 MW of wind plant throughout the country with another 461 MW awaiting approval. UFEE's joint ventures in wind, however, are ignored, such as the most recent 48 MW installation in Somozas, Galicia, developed by EASA, which is made up of UFEE, Ecotècnia and another small private developer, Energ’as y Recursos Ambientales.

Indeed, the only joint venture alluded to by Cinco D’as is the Higueruela development, mentioned in connection with the wind activities of Iberdrola, the other half of EEE. Iberdrola also plans to invest another ESP 150,000 million (EUR 901.5 million) in a further 1500 MW of wind plant to be installed, mainly in the regions of Galicia, La Rioja, Pais Vasco and New Castille, according to the newspaper. Iberdrola also owns 50% of Gamesa, Spain's manufacturer of Vestas turbines.

Similarly, another large utility, ENDESA, owns one of Spain's own-technology turbine manufacturers, MADE. According to the most recent figures available, 291 MW of MADE turbines were up and running at various sites in Spain at the end of April. In 1998 MADE was split into two: MADE Energ’a Renovables, dedicated to development, and MADE Tecnolog’as Renovables, dedicated to manufacturing and R&D. Cinco D’as states that MADE Tecnolog’as expects 1520 MW of its turbines to be installed between 2000 and 2004, amounting to a total investment of ESP 224.2 billion (EUR 1.3 billion). MADE confirms that about 60% of the turbines will go to the group's own developments, whilst the remainder are destined for projects by other developers. Once again, Cinco Dias stresses ENDESA's continued commitment to manufacturing, saying this is evident from MADE's plans to launch a 1.32 MW turbine next year.

The attraction

There is no mystery about the utility attraction to wind in Spain. The public is footing the bill, with sizeable state subsidy of the power purchase price. Carmen Beceril, director of the Institute para la Diversificaci—n y Ahorro de la Energ’a IDAE, a government renewables agency, is quite unequivocal: "There now exists a very favourable regulatory framework for wind development. The price per kilowatt hour for wind power is quite high; practically 90% of the final consumer price. It is largely due to this that wind has gathered such great impetus in the last three years."

Not only do the utilities profit from the statutory guaranteed price for wind power by way of their share in affiliated wind development companies, but they also rake back the guaranteed price they are obliged to pay through the country's single price mechanism and, ultimately, the final consumer.

State-run institutions such as IDAE (itself an active wind farm developer) are unable to provide any information on the split in market share between private and utility wind development. This being the case, the free-market health of Spain's wind sector can only be appraised via close scrutiny of forthcoming developments. With the utilities eager to blow their own trumpet in what is now Europe's third largest producer of wind megawatts, this presents a challenging task. There is little doubt that the utilities do have a lot to be making a noise about, even if their contribution to wind power in Spain is just a tiny proportion of their overall investment. But the existence of a robust private development industry is an essential utility counterweight if the wind momentum is to be maintained. Will it be allowed to survive?

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