Controversy over new wind law

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Legal proceedings against the Spanish government's new regulation for pricing electricity from renewables is being planned by the Asociación de Productores de Energías Renovables (APPA). The industry group says its action is aimed at "rectifying" the regulation "without this needing to affect its positive aspects."

APPA supports the regulation's incentive for encouraging wind plant operators to schedule their production on the wholesale market, also referred to as the electricity pool (Windpower Monthly, May 2004). The group also praises the long term market stability introduced by indexing both the scheduling incentive and the alternative fixed wind power purchase price to the electricity market's average electricity reference price.

But APPA objects to the elimination of a former pricing option which offered wind plant operators the average hourly pool price of electricity plus a production incentive, as laid out in Spain's electricity sector law from 1997. In a transition clause of the new regulation, the production incentive option is only partially retained, and only to 2007.

Furthermore, the transition measure obliges wind plant operators to schedule hourly generation 24 hours ahead of delivery, even though it is impossible to precisely estimate wind power production that far ahead in time. Since the cost of buying in power to make up a shortfall is greater than the price that excess power can be sold for, wind generators are put at a financial disadvantage compared with technologies able to meet precise schedules.

"There is no real transition if major new obligations are imposed," argues APPA's Sergio de Otto. APPA holds that changes to any market regulation must, by law, include measures to protect investments already made and so avoid the problem of "stranded costs."

APPA has formally lodged its intent to sue the Spanish government administration. The response of the new government to this aggression, says APPA, has been receptive. The new Labour government came to power following Spain's March general election, held immediately after the former Conservative government ushered in the new renewable energy regulation. APPA says it will halt legal proceedings if the new government acts to comply with its demands.

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