A good part of the first annual convention organised by Spain's wind association, Asociación Empresarial Eólica (AEE), saw the domestic industry patting itself on the back for the 16 GW of wind power capacity at home, for its pioneering efforts on integrating wind into an existing electricity network, and for the ranking of its companies among the sector's world leaders. In terms of wind plant ownership, three of the world's top four companies are Spanish or have strong Spanish roots: Iberdrola Renovables, Acciona Wind Energy and EDP Renováveis. While EDP is Portuguese, its renewables company is a Spanish affiliate. In Gamesa, Spain also fields a company among the top three wind turbine manufacturers.
Behind the scenes of self congratulation, however, the event's 150 delegates learned they were facing major challenges, including falling financial incentives from government in a world of rising wind plant costs, the threat of yet more changes to the national wind market support mechanism, and Spain's pressing need to accelerate expansion of its grid interconnection capacity with the rest of Europe.
In Spain, nobody is pushing for better interconnection more than Red Eléctrica de España (REE), the transmission system operator (TSO), according to Luis Atienza, REE's president since 2004. He opened the conference with perhaps the most effusive public words of support to wind ever offered by REE, once among the sector's staunchest opponents.
"There's been a complete change of attitude and culture at REE," said Atienza. He stressed that, thanks to the Spanish wind sector's collaboration, led by AEE, 100% of Spain's wind power capacity now operates under real-time monitoring and emergency control by REE. All new turbines are able to keep feeding power into the network during sporadic voltage drops and so help restore grid stability. "Spain has become an international reference for integrating wind," said Atienza.
The TSO, he says, is "working proactively" to meet the government's formal objective of 29 GW of wind power capacity by 2016, with 40 GW expected for 2020. Spain has nearly 16 GW of wind capacity today.
Just five years ago, REE viewed the former 9.5 GW national wind target for 2010 as "system security suicide," confessed Atienza. Back then, REE argued that wind could not provide more than 12% of Span's electricity without risking security of supply because its poor interconnection with the European network through France prevented it balancing the highs and lows of wind production by exporting and importing power. The interconnector represents just 3% of Spain's total generating capacity. But as Atienza now points out, wind power spot penetration levels are often 20-30%, recently touching 40% (Windpower Monthly, May 2008). Flexible dispatch and scheduling is the key.
Better interconnection is also on the way. Atienza said REE was a driving force behind the recent agreement between the Spanish and French governments to build a 4000 MW line across the eastern Pyrenean mountain range by 2014. REE is also pushing for another similar line for the western Pyrenees.
But the 29 GW target also requires gas-fired generation, says Atienza. He described it "as the essential cushion needed to absorb wind variations." Later in the day, however, Arthouros Zervos, president of the European Wind Energy Association (EWEA), reminded delegates that the European Commission's proposed 20% renewables objective to 2020 pins the balancing solution mainly on better European grid interconnections.
All Spanish presenters praised the EU Commission's plan for 20% renewable energy by 2020, though Iberdrola's Gonzalo Sáenz de Miera stressed the need for careful co-ordination in converging national interests in the final EU renewables directive. Sáenz de Miera praised the European parliament's support of flexibility mechanisms whereby member states not on course to meet their renewable energy targets may buy guarantee of origin certificates from states surpassing their targets. "A great opportunity both for countries like Spain and for other countries with little wind capacity," he said.
The rising cost of fossil fuel generation means the price gap between it and higher cost wind is closing, said Iberdrola Renovables' Xabier Viteri. New wind power generation from capacity coming online this year had actually competed on the wholesale market with zero subsidy during 2% of operating time, according to Fernando Ferrando, of utility Endesa's renewables division.
Since the start of this year, new rules on power purchase subsidies have capped the total payment for wind, made up of the average wholesale price of electricity and a EUR 30/MWh subsidy, at EUR 87/MWh. When the wholesale price goes above EUR 57/MWh, the incentive is reduced and when the wholesale price reaches EUR 87/MWh, it disappears, which happened briefly.
Ferrando pointed out that the EUR 30/MWh target incentive for new capacity was paid just 43% of the time. For 49% of the time, the subsidy was less. In all, he calculates the average subsidy paid over the period was EUR 24/MWh, 20% below that expected. The average price paid for generation from new wind capacity came in at EUR 84.8/MWh, compared with EUR 98.4/MWh paid over the same period for power produced by the 15.14 GW of wind plant that came online in Spain up to the end of 2007, before the new rules kicked in. Old plant continue to receive a production incentive of EUR 38/MWh.
But the government is once again set to tamper with its pricing mechanisms, according to Acciona's Carmen Becerril, a former director of government energy policy. The current regulation is not even a year old and is the third since 1999. "The sector needs greater visibility and more stability than that," she argued.
All speakers on the subject warned that the brief convergence of the price paid for wind power with the wholesale market price of electricity was no reason to reduce the incentive payment. "There's a gigantic market ahead and a great opportunity to really increase energy cost competitiveness," said Viteri. Support mechanisms need to remain strong to give wind the final push as a competitive main stream generator, he argued, especially in a time of rising wind turbine prices.
A session at AEE's conference dedicated to wind turbine manufacturers saw newcomers to Spain like Suzlon of India and Germany's Enercon squeezed between stalwarts, including Spain's own Gamesa, Vestas of Denmark and America's GE Energy. Most agreed that the days when they had to submit industrial investment plans for approval to one or more of Spain's 17 autonomous regions and comply with demands for local production of turbine parts have largely passed into history. "I hate them," said GE's Mete Maltepe. Like Gamesa's Juan Diego Diaz, he argued that fragmenting the industry by demanding local manufacturing went against the optimisation of quality and logistics necessary to feed a huge Spanish and south European market. Consolidation is also essential when competing in emerging markets with cheap labour, especially in China, which already has 40 turbine manufacturers, according to Diaz.
Spain is proud to be a global wind industry leader and recognises the socio-economic benefits the industry has brought to rural areas. As a result, wind power is politically popular. A study by Deloitte, commissioned by AEE, puts wind power's value to the Spanish economy at EUR 1.7 billion, or 0.18% of GDP, up from 0.13% in 2003. It expects wind to be contributing EUR 2.5 billion by end-2012, or 0.24% of GDP. Deloitte's Enrique Doheijo said wind avoided EUR 888 million in fossil fuel imports in 2006, though EUR 853 million was paid in wind power production incentives. Spanish wind currently employs close to 17,800 people, with nearly 30,000 expected by 2012, he said.
The average Spanish citizen, however, remains unaware that the country ranks among the world's top three wind producers and was the biggest market in Europe in 2007. To help hit the message home, AEE had planned to place a 2 MW wind turbine nacelle outside Real Madrid Football Club's Bernabeu Stadium, on Madrid's busiest thoroughfare. A four-day transport strike and partial blockade in protest against soaring oil prices, prevented that coming off. "Next time," said AEE's Segio de Otto.