All indicators point to roaring growth in Spain's wind market over the first nine months of 2004. More than 840 MW has been brought online, with a further 1700 MW building (table next page). By the end of the year, Spain is on course to have installed or be completing construction of more than 2500 MW of new wind stations, bringing cumulative capacity to 8750 MW, nearly 40% up on the total last year and not far behind that achieved by Germany in 2003, the most active market until now.
Two companies say that between them they have connected or started construction on nearly 1000 MW this year. Utility Iberdrola lays claim to over 500 MW, while wind project developer Corporación Energía Hidroeléctrica de Navarra (EHN) puts its activity since January at 436 MW. At least four wind clusters in excess of 100 MW are being built by others. Elecnor is installing its 128 MW Faro-Farelo project in Galicia, using Ecotècnia 1.65 MW turbines. Sinae has started on its 128 MW Campollano project in Castile La Mancha, using Gamesa Eólica 850 kW machines. In Aragón, Gamesa is working on its Fuendetodos-Entredicho cluster using its own technology. And in the small Andalucian district of Tarifa, three developers are currently building 151 MW.
As yet it is still too early to tell whether the boost in activity is the beginning of several years of steady sector growth, or whether Spain is experiencing a one-off rush with the realisation of a wave of project development started at the beginning of the Spanish wind boom in the late 1990s.
Spain's new wind tariff regulation, rubber stamped in March this year, is already producing positive results, according to national wind association Plataforma Eólica Empresarial (PEE). The regulation provides for secure earnings over the full life cycle of a wind power plant (Windpower Monthly, April 2004). Under the old rules, tariff targets were revised every four years. Although projects currently building have been in the processing chain for at least four years -- often much longer -- PEE says the new regulation is now speeding up the final stage of financing. "The banks, which put up 80% of plant investment, are now more relaxed about wind. They are reacting more positively to permits already lined up. And new building permits will have less trouble landing finance agreements," says PEE's Alberto Ceña.
"The key to future growth lies in central government support, national grid dynamics and regional grid absorption capacity," says Ceña. The right action is needed on all three fronts for the wind market in Spain to maintain current growth rates.
A new government came into office in March 2004 headed by the labour Partido Socialista Obrero de España (PSOE). Renewables and clean air policy form a major part of its political agenda. Over the summer, the new political head of energy efficiency agency Instituto para la Diversificación y Ahorro de la Energía (IDAE) revealed government intentions of raising Spain's wind target from 13,000 MW by 2011 to 20,000 MW by the same year. There is still no ministerial confirmation of the new target.
The government's short track record so far looks promising, however. PSOE has come up with a fully endorsed national allocation plan for CO2 emissions, meeting an EU directive that its predecessor had woefully failed to do. It has also ditched the former Conservative government's EUR 4.2 billion water plan, which aimed to transfer northern river water over 920 kilometres to Spain's dry east coast regions, to the horror of environmentalists. PSOE's EUR 3.8 billion alternative involves building 11 desalination plants in these dry areas. PSOE promises the estimated 0.8 % increase in electricity demand from desalination will be met by renewable energy sources, wherever possible, and mainly from wind power.
"If political backing from the central government continues, it will be a great help in overcoming obstacles to wind. Most of all, it will help define the real limits of integrating wind power into grid dynamics," explains Ceña. PEE has now started a grid study with grid operator Red Eléctrica de España, (REE) to define these limits.
Upping the target
Iberdrola's Angeles Santamaria points out that the previous government's 13,000 MW wind target was a technical limit based on a report by REE, which controversially considered that to be a limit on what the grid could take of variable wind power without endangering system security and supply guarantees. Santamaria says the report was from before the new tariff regulation's requirement that from 2005 all wind operators are to schedule daily generation 24 hours ahead of production. Penalties incurred for producing above or below schedules are aimed at making wind production more predictable for REE.
Iberdrola's renewables director, Pedro Barrioso, estimates the new regulation should raise the bar to at least 18,000 MW. With today's regional targets aiming for more than 24,000 MW of wind power in Spain, however, building more transmission and upgrading local grids remains a national priority if Spain is to fulfil its political ambitions for greening its electricity supply.
Few of Spain's wind plant operators have so far moved over to the new regulation's option of selling their generation into the wholesale pool market, despite the greater earning opportunities offered (Windpower Monthly, May 2004). Instead, they are sticking to a fixed-tariff alternative, which obliges them to schedule output and risk penalties for getting it wrong. "Mainly a case of better the devil you know," says Ceña. PEE expects a mass move to the wholesale market soon, however. It says the delay is because producers are still grappling with the administrative complexities of the market. "Already, a large number of operators have applied for rights to produce on the market," says Ceña.
At the same time, developer-turbine manufacturer Gamesa has set up a new electricity market agency company called Wind to Market. While many smaller wind operators claim to have been invited to aggregate and sell production on the pool through Wind to Market, Gamesa has not yet publicly announced its new outfit.
Grid locks and keys
Political will and improved grid integration aside, the capacity of regional power lines remains a key factor. Strong development in Valencia and Galicia seems likely, but concerted action on grid improvements is needed if promises are to be met elsewhere, especially in the central regions of Castile-La Mancha and Castile and León, in the sprawling region of Andalucia in the far south, and Catalonia in the far north-east. Even if extensive grid planning in these regions can open the way to connection of large amounts of new capacity, REE is going to need some convincing that it can take it all on board and maintain security of supply. All eyes are now on the central government to see if it can come up with the means of persuasion.
Galicia's powerful wind development performance has gone hand-in-hand with the region's grid improvements and is perhaps the best illustration of what good grid planning can do for Spain. In the first eight months of the year, more than 600 MW has either been connected in Galicia, which lies north of Portugal, or is under construction, confirms the regional government, bringing the total to 1649 MW. "The vast bulk of Galicia's project plans are ripe for development and building responds rapidly to new grid openings," says Manuel Pazo of Galicia's regional wind association Asociación Eólica Gallega (EGA). One EUR 36 million grid improvement agreement for the Finisterre area, signed in 1997, is now complete, he says. Another one, for the Lugo area involving another EUR 36 million is 40% realised, with completion scheduled for 2006, says Pazo. EGA thinks the new infrastructure will allow Galicia to maintain strong growth and to meet its objective for 4000 MW of wind in two or three years. "Galicia's wind target could easily be raised to 6000 MW," says Pazo.
A more local illustration of good planning is the 400 MW grid improvement agreement for Tarifa in the far south, signed in 2002 between a group of wind project developers and REE. Over the last three years, development in this once pioneering wind region has crawled. But this year, building has started on 175 MW, according to the regional government. New regional regulation is now forcing developers elsewhere in Andalucia to emulate the Tarifa model so they can reach the government's 2400 MW wind objective. Already, agreements in two areas covering the provinces of Huelva and Almería have established priorities for the connection of projects now ready to build with a combined capacity of around 800 MW. The only delays now involve building and financing new power lines -- a process which took about two years in Tarifa. Three other areas in Andalucia -- Málaga, Cádiz and Granada -- are now negotiating priorities for a combined total of 1650 MW.
In the far north-east of Spain, a grid plan for the region of Aragón in 2001 to connect 1500 MW is ticking over. Wind stations building and connected over the first nine months this year have a combined capacity of 291 MW. "Progress has been slower than expected mainly due to administrative bottlenecks," says Vicky Planillo of regional association Asociación Eólica de Aragón.
Next door to the east in Catalonia, installed capacity has stood at a poor 87 MW for nearly two years, due to refusals to connect more wind power to the grid. The region remains way off its 3000 MW objective. In contrast, tiny Navarra, Aragón's western neighbour, is a wind power leader with more than 40% of its electricity demand being met by wind. It has 776 MW online and a further 25 MW building. Navarra is pushing close to its self-imposed cap, set at 900 MW due to environmental and grid restrictions.
The governments of Spain's two huge central regions, Castile la Mancha and Castile and Leon, are keen to get the wind industry involved in planning -- and paying for -- the necessary transmission and grid upgrades. To meet its 4000 MW wind target, Castile la Mancha, already with 1250 MW turning, is dependent largely on completion of a new power line, financed by wind developers, across the provinces of Guadalajara and Ciudad Real. Iberdrola says building on the line has begun, but it will likely take many months to complete. Most of the grid capacity still available has been taken up by the 323 MW now under construction.
Castile and León has a substantial high voltage network, but the regional government is trying to minimise the number of new lines feeding into it. Wind project developers are being called upon to pool resources in local groupings. This year, 292 MW has been connected and 352 MW is building. "But now there is a dramatic slowdown, with licenses granted for just 60 MW since January," says Eugenio Garcia of the Castilla y León wind association. His worries may be short lived. The government is talking about raising the regional limit from 4000 MW to 6000 MW. Today, a little more than 1200 MW is turning in Castile and Leon.
In Valencia, there are grounds for optimism. The 2242 MW development concession granted by the regional government to five groups of prospective operators is now ready to start building in this eastern region. Developers have been working jointly on grid reinforcement lines over the past 18 months. EHN, the driving force behind a group with a 793 MW concession, says it expects to start putting up its first turbines by December.
Lastly, Spain's islands in the Mediterranean and off the north-west coast of Africa are not about to be left out. This year, Gamesa has put up 3 MW in the Balearic Islands at Es Milá, while Dutch utility Nuon's Spanish wind subsidiary, DESA, is installing 6 MW on the Canary Island of Tenerife, using Gamesa 850 kW machines.