Tilting at windmills

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What looked like the makings of a tedious and drawn out seminar on wind energy unexpectedly evolved into a full blown confrontation between utilities and wind plant developers, reviving the acrid debate in Spain surrounding alternate and traditional sources of power production. The players in this particular round of the ongoing polemic involved the Canary Island utility Unelco on the one hand and wind turbine manufacturer Aerogenadores Canarios SA (Acsa) and the new regional government on the other. Acsa and the government accuse Unelco of deliberately undermining efforts to give wind a chance.

Their quarrel is not new (Windpower Monthly, June 1992), but the November Seminar on Wind Energy in Southern Europe, organised in Puerto Santa Maria in Cadiz by the Spanish Institute for the Conservation and Diversification of Energy, provided a unique chance for Acsa and the regional government to vent their views in front of an audience representing key players in the wind energy industry from across the globe. The confrontation emerged during question time after a paper delivered by Unelco "full of half-truths and inaccuracies," according to Luis Garc’a Mart’n, the director general of the regional government's Department of Industry and Energy.

Acsa, a long-time partner in Spain of Vestas Wind Systems of Denmark, is deeply embittered over what its president, Pedro Marrero O'Shanˆhan, claims to be the utilities "intolerable opposition" to wind power producers' efforts to make "consistent and considerable contributions" to the regional grid in the Canary Islands. "We have lost millions of pesetas in projected returns on investment, had a valued partnership endangered and our reputation questioned," complains Marrero O'Shanˆhan. Garc’a Mart’n believes Acsa was lucky not to have lost much more. "If we hadn't intervened at one stage," he says, "today Acsa wouldn't exist as such. It would have had to file for bankruptcy."

The controversy centers on the Jandia wind farm on Fuerteventura which, after partly coming on line this Christmas, is Spain's second largest wind project after Tarifa in southern Spain, with a capacity of 10.46 MW. It is made up of 27, Made 180 kW turbines and 18, Made 300 kW. Construction of the wind farm has been dogged from the start, not least by environmentalists' claims that its emplacement in the Jandia nature park would upset the rare houbara bustard (Chlamydotis undulata fuerteventurae) of which only 300 are left on the island. A similar bird species exists in small pockets in Asia where it is also endangered.

But according to Acsa and the regional government authorities, the bid by the local environmental group, The Canary Islands Friends of Wildlife, (Ascan) and the prestigious Birdlife International organisation to halt construction of the wind farm through complaints filed to the European Commission (EC) caused hardly a hiccup. The EC's intervention briefly suspended work on the wind farm this summer, but this was nothing compared with the delays caused by the initial fight to get the wind farm off the ground. As Marrero O'Shanˆhan explained, the project was hamstrung from the start by shadowy political and business dealings and became a bitter lesson to wind farm developers and especially foreign companies with an eye on developing wind power in Spain.

Inside story

The inside story unravelled after the Unelco representative at the conference ended his paper with an unfortunate remark regarding the utility's readiness to connect independent wind power producers to the grid. Grid connection of renewable plant is guaranteed by law in Spain. "I was astounded at the contradiction between his paper and his company's long-standing restrictive policy on grid connections, " says Garc’a Mart’n, who read a printed version of the Unelco paper during an unscheduled break he took to visit the nearby Tarifa wind farm. "We raced back to the conference centre just in time for me to express my total disagreement with his views after he ended his reading. I couldn't believe it."

Mart’n's brief but eloquent attack on the Unelco paper in the time reserved for questions was preceded by an equally damning verbal assault by the president of Acsa. Apparently non-plussed, the Unelco representative, José Manuel Garc’a Munoz inelegantly bowed out of the controversy claiming he was going to miss his flight and left without offering a satisfactory explanation. The chairman of the session, Apostolous Fraoulis of Greece's Centre for Renewable Energy Sources (Cres), unaware perhaps of the background to the confrontation, tried his best to restore order in the auditorium which had become a cacophony of whispered indignation.

Discussion of the episode spilled over into subsequent sessions the following day. Acsa president O'Shanˆhan explained how a relatively straightforward operation to execute the Jandia project had turned into a nightmare. Acsa secured the ESP 550 million tender in 1991 from the Fuerteventura Water Consortium, which had obtained much of the financing to build the Jandia wind farm from the EC's Valoren programme for regional development.

"As a joint venture with our partner Vestas," says O'Shanˆhan, "we were to supply 60% of the long-term financing for the project which we had previously arranged with several banks. But then we were told by the Department for Industry and Energy that, at least to start with we couldn't supply more than 4 MW to Unelco's grid because it would destabilise the grid. The banks which had initially agreed to finance the project then withdrew, claiming rightly that the new conditions made the venture financially impractical."

A second condition laid down by the Canary Islands' department for the environment, which made the banks even more wary of the operation was that if the farm in any way affected the population of houbara bustards the entire wind farm would have to be torn down. Acsa's president believes that both conditions, which were not contained in the original contract, were imposed by the Department for Industry and Energy on the recommendation of the politically powerful Unelco.

"You have to understand the politics of the island government at the time," says Mart’n, who was recently appointed Director General of the Canary Islands Industry and Energy department. "Unelco is a subsidiary of the state-run Endesa utility and at that time the regional government was in the hands of the ruling Socialists, the PSOE. We believe there was a certain degree of collusion." Mart’n was brought in by the new Canary Island's AIC coalition, which took over the reins of power in a May 1993 censure motion that unseated the PSOE.

Last ditch attempt

Acsa immediately set about looking for alternate forms of financial backing. Several options were discussed and discarded, rejected either by Vestas or the Water Consortium. In a last ditch attempt to save the project, Acsa suggested that Made, the Spanish wind turbine company which had approached them on several occasions, be invited on board on the condition that it financed the project. Made machines are manufactured by another subsidiary of Endesa. "After protracted negotiations, we reached an agreement whereby Made would finance 54% and Vestas and Acsa the remainder," says O'Shanˆhan. Vestas initially agreed, but then said it would only go ahead with the project on the condition that Made gave them a banker's warranty guaranteeing them payment for their turbines. This Made refused, and Vestas withdrew. "It was an unfortunate thing to do and frankly," says Marrero O'Shanˆhan, "given the circumstances, I think Vestas was in the wrong. The money was going to be released in staggered payments as stipulated under the original terms of the contract and there was little chance of this part of the contract being revised. I can only think the company was discouraged by the developments and wanted some sort of guarantee to ensure no further upsets would endanger its investment." In statements to the press in Denmark, Vestas said it pulled out because of the conditions attached to the grid connection agreement and because of environmental conditions attached to the planning permit.

For its part, Acsa found itself faced with an appalling dilemma: if it went ahead with the project in liaison with Made, it stood to lose its coveted partnership with one of the top wind turbine manufacturers in Europe since Vestas had already hinted that Acsa was acting in bad faith by inviting a competitor to join the project. On the other hand, if Acsa withdrew it would be barred outright from future projects in an area which has a very promising future in wind power. O'Shanˆhan estimates there is potential for as much as 250 MW by 1998 and 300 MW by 2005. The regional government's target is for wind energy to produce 10% of the islands' power needs by the turn of the century. "We were up against the wall. Time was running out and if we had thrown in the towel then, the Water Consortium would have lost the Valoren subsidy because it would not have had time to organize a new tender. As a Canary Island company, this would have meant the end for us since we would have been blamed for the debacle. Nobody would have taken us seriously."

Acsa went ahead but views the option finally adopted as the lesser of two evils. Under the new agreement, Made obtained 90% of the profit margins on the construction of the farm and Acsa 10%. This was 80% less than it had originally contemplated. To add insult to injury, Acsa's dealings with Vestas, with whom it had an agreement covering all of Spain, suffered enormously. "We are talking again, but our relations have been irreversibly damaged. We would really like to see restored the conditions of our original partnership," says O'Shanˆhan.

That episode ended in a lot of bad feeling on the part of all sides concerned, perhaps with the exception of Unleco which now boasts a 40% stake in the ownership of the Jandia farm. But the feud has fuelled the controversy between wind power supporters and detractors. In the long run this could prove detrimental to the short term aims of the utility. The new Canary Island authorities, surprisingly forthright in their criticism of Unelco, charge that the utility is slowing down the aims of government to turn the islands into a showcase example of how a region can shake off the yoke of traditional power systems based on fossil fuel and introduce environmentally-kind renewables on a grand scale. And they plan to do battle.

New pro-renewables legislation

Their key weapon is the complete overhaul of current legislation governing energy production, underpinned by grants for renewable energy projects. Part of the plan consists of slapping a tax on Unelco's thermal plants. According to Guillermo Galan, a technician who scans pollution levels for the government, pollution from these power plant occasionally reach prohibitive levels. Spain's ombudsman recently took Unelco to task over sulphur dioxide pollution in a report highly critical of the company.

"Over the next few months, we are going to present to parliament a law which supports clean energy production systems and eliminates the obstacles that currently hinder them, " says Domingo Berriel Martinez, the Canary Island's vice minister of the Department of Industry and Commerce. "The bill will redefine the regulations regarding grid connection and eliminate the imprecisions that left legal loopholes. These have served to brake the development of wind power. The overall aim is the greatest reduction possible of fosil fuel use for power production in the Canary Islands."

José Manuel Garc’a Muñoz, a deputy director with Unelco, refutes Acsa's claims and professes surprise at the hostility expressed by representatives of the Canary Island government during the seminar. "We have never opposed wind power and our ESP 1.3 million investment in this form of energy production over the past few years should suffice to show our commitment to wind power." What could be interpreted as opposition, he adds, is Unelco's concern with protecting its consumers' interests. "The Canary Islands cannot depend on wind power alone given the sometimes erratic supply caused by weather patterns," he says.

Regarding Acsa's complaints, Garc’a Muñoz rejects allegations made by the company concerning the utility handling of the Jandia wind farm. "Business is business and everybody is out to protect their own interests, but the fact of the matter is that by law we are obliged to connect wind power electricity. We refuse to be accused of obstructing this project. The main stumbling block," he concludes, "was the issue of the infamous Houbara bustards."

ACSA puts the blame for its dispute with the utility fairly and squarely on Unelco. "Once Made joined the project, all of a sudden all the difficulties disappeared overnight," says Marrero O'Shanˆhan. "No restrictions regarding grid connection or our 10 MW output, nothing. It's perfectly obvious. You don't have to be an Einstein to come to the same conclusions we came to some time ago: Made and Unelco are sister subsidiaries of ENDESA the state-run power company." And how would O'Shanˆhan describe Unelco if pushed? "What can I say? It's not my favourite company, and if I had to use adjectives to describe it they would by very, very tough ones."

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