Government promise for more security -- Spain's wind tariff

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After slightly reducing the wind tariff for 2003, Spain's government immediately promised to incorporate "medium and long term predictability for renewables investors" in a revision of the tariff regulations. This has been widely interpreted as an intention to scrap annual tariff revisions in favour of less frequent adjustments.

Since the announcement, Spain's renewables association Asociación de Pequeños Productores Autogeneradores (APPA) has eased off in its attacks on the tariff reduction. The association's Manuel de Delas is now merely saying the cut could be viewed as "negative" by the financial markets. Earlier he claimed it would "paralyse" Spanish renewables. Many APPA members consider that longer term tariff predictability is more important than keeping the tariff high. With this goal in sight, they are wary of antagonising energy secretary Jose Folgado with complaints.

All eyes are now on Spain's energy regulator and electricity board, Comisión Nacional de Energía (CNE), which is one of the most influential advisors on government energy policy and will submit its recommendations for the government's revised payback mechanism. CNE, regarded as a wind power sceptic, has suddenly come out in favour of the sector. The board's December report opposed a reduction in the renewables tariff, especially for wind.

Up to last summer the press repeatedly reported CNE worries regarding the costs and negative effects on the electricity system from the amount of wind power that the tariff had encouraged. Furthermore, in an official report last year, CNE expressed its desire for market mechanisms to draw wind into the standard electricity market of supply and demand in order to reduce the amount of unscheduled production on the network.

APPA claims its own detailed market study to be partially responsible for CNE's U-turn, especially regarding estimates on the real costs of putting up wind turbines. APPA says the state energy department calculated installed capacity costs based on outdated figures from the state run energy efficiency agency, IDAE. These cited an installed cost for wind in Spain of EUR 780,000/MW, whereas APPA -- and reportedly CNE -- believe EUR 955,000 to be more realistic. Similarly, APPA claims that CNE believes that the return on wind investments is closer to APPA's 8% estimate than Folgado's 10%.

Not only CNE, but also grid operator Red Eléctrica de España (REE) has shown signs of being more wind friendly. It gives wind power credit for staving off power black-outs on January 9 when electricity demand nationwide peaked at a record 35,600 MW.

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