Europe: Spanish worries over price support

Production incentives under scrutiny. Spain's central government may scrap production incentives for power sales from wind and other renewables, according to national wind energy association Asociacion Empresarial Eolica (AEE). The government is expected to continue to set guaranteed minimum and maximum prices for wind power on the wholesale electricity market, but there are concerns that they may be too low to be viable.

The government's apparent line of thinking was revealed in September after an AEE meeting between its president, Jose Donoso, and state energy secretary Pedro Marin. Donoso would not speculate whether Marin's "considerations" are actually intentions, but adds that no alternative was proposed. Marin's office did not respond to a request for comment.

The lack of clear direction puts Spain's wind sector in a difficult bind, says Donoso, adding, "It's a bit late in the day for juggling ideas." With over 17 GW online, the wind sector is fast approaching the 20.15 GW national target to end-2010. The country's once-roaring wind market ground to a halt in May, when the government decreed a central register system for approval of new projects to ensure development did not exceed the target. The result was an avalanche of wind farm proposals on Marin's desk and a logjam of projects. "What we need urgently is a long-term framework beyond 2010 so projects can start negotiating finance again," says Donoso.

Quota system

Donoso adds that the state's energy secretariat is also considering a quota system calling periodically for small quantities of new wind capacity: "We oppose no system as long as it provides long-term industry visibility and stability with reasonable returns, enabling us to reach the 40-45 GW to meet the EU's 20% renewables objectives to 2020."

There are concerns that frequent, small requests for wind farm development tenders would create a severe backlog as wind projects typically have a five- to seven-year development time line. "We would need calls announced every two years or more," he says.

Under current policy, Spanish electricity retailers must buy wind power at the country's average wholesale electricity price. Added to that price is an incentive payment set by the government, plus a bonus for wind plant operators who schedule their production a day ahead of delivery. The incentive is EUR38/MWh, indexed to inflation, for plants installed before 2008, paid regardless of rises in wholesale prices. Wind farms connected after the start of 2008 receive EUR30/MWh and their combined wholesale price and incentive is capped at EUR87/MWh. There is no cap for capacity connected before 2008.

A fixed power purchase price of EUR74/MWh is another option for wind plant owners. But with good chances of securing higher prices for wind power on the open market and a government mandate not to go below EUR73/MWh, few have opted for this in recent years (Windpower Monthly, March 2009).

One wind developer says that if the government were to impose a minimum price of EUR70/MWh, most Spanish wind farms would be economically viable, although that would fall far below the combined production incentives and wholesale purchase prices achieved on the market in 2008.

Have you registered with us yet?

Register now to enjoy more articles
and free email bulletins.

Sign up now
Already registered?
Sign in