Market Status: Spain - Roaring sector spins into regulatory uncertainty

SPAIN: The Spanish wind market was Europe's largest in 2009, with around 2.5GW of new capacity connected.

Total installed capacity is now 19.1GW. Spain's Gamesa still leads the market with around 34% of new installations in 2009, but other manufacturers are making major inroads into its share. Vestas, in particular, has gained ground. In 2008 Gamesa held 50% of the market and Vestas only 15%, but by 2009 Vestas controlled almost a quarter of the market (see graphic, overleaf).

Late last year, Spain's central government approved in principle 6.4GW of new capacity by 2012 (Winpow Monthly, February 2010). It also set a new target of 23GW of wind in total by 2012. Prior to the new target being set, Spain was aiming for 20.2GW at the end of 2010. The industry ministry envisages capacity increasing by 1.7-1.8GW annually. The official target for added capacity in 2010 is 1.85GW.

Beginning in May, a law forced all projects not yet registered as fully operational to be entered into a central ministry register as a precondition for approval. With 17GW installed by that time, the government's intention was to stop regional authorities from allowing runaway development. But Jose Donoso, president of Asociacion Empresarial Eolica (AEE), Spain's wind association, says the missed opportunities during the half year in which the industry ministry processed applications to the central register could have unintended consequences.

"Few if any contracts were signed (during 2009)," says Donoso. "We are going to see the effects of that with a near freeze on building activity during the first half of 2010." AEE believes a pick-up in the second half could bring at most 1GW of new capacity online - not enough to recoup the 5,000 wind jobs it says vanished last year because of the turbine contract limbo.

The industry is also concerned about rumours last autumn that the government plans to scrap production incentives for power sales from wind and other renewables. Despite a general expectation that mandated minimum prices for wind power on the wholesale electricity market will continue, the fear is these may be too low to make many projects viable.

Exceeding targets

Spain's industry far outstripped its 2009 allocation of 1.88GW, installing 2.46GW, according to AEE. It was the country's second-highest annual total ever. Counting turbines generating but not yet with full commissioning papers, system operator Red Electrica de Espana (REE) puts the figure at 2.58GW.

In the course of 2009, wind became Spain's third-biggest producer of electricity, covering 14.3% of annual demand, according to provisional estimates by REE. It displaced coal, which covered 12.7%, but was behind combined-cycle gas (30.4%) and nuclear (20%). In November and December, wind replaced nuclear as the country's second-biggest producer, covering 20.1% and 21.2% of national monthly consumption respectively. Wind reached a momentary peak of covering 54.1% of demand on December 30, beating previous peaks in November and March of 53% and 43%.

Donoso says the fact that Spain was able to exceed its 2009 allocation regardless of the new rules was a result of capacity already in the pipeline. "The long supply chains have their own momentum and cannot be stopped just like that," he says.

Momentum also explains why projects totalling 600MW that did not make the central register are in fact up, under construction or with turbines already in stock. AEE is pushing the ministry to fast-track that stranded capacity on to the central register; all wind farms must enter the register to be eligible for production incentives, currently at EUR38/MWh, paid in addition to the price achieved on the wholesale electricity market.

But one downside of the sector's exceeding its allocation in 2009 is that it means some of 2010's 1.85GW allocation has already been built, leaving less for the industry this year. Even some of the capacity scheduled for 2011 and 2012 was built in 2009; in fact, of the 6.4GW of new capacity allocated for 2009-2012 (see table, below), just over 4GW is already up or under construction, says AEE. This is not enough to sustain the domestic wind industry, says Donoso. He is petitioning the government to allocate extra capacity to ensure that just over 2GW of turbine manufacturing nationwide each year, in line with the national average between 2004 and 2008.

Donoso believes the ministry's energy secretariat is listening. In December, it sent the European Commission broad outlines of a provisional renewable energy plan for 2011-2020. This set a target of getting 22.7% of primary energy consumption from renewables by 2020, compared to the EU Renewable Energy Directive's 20% target for that year. In terms of power generation, renewables' contribution to Spain's electricity mix is targeted at 42.3%, up from the previous expectation of 40%. In the past, government offices had acknowledged total wind capacity would need to reach 40-45GW by 2020 to meet the earlier target, meaning a target of at least 40GW by 2020 is now likely.

Future concerns

Meanwhile, it seems likely the effects of the centralisation law will resonate beyond 2010. As a result, Spain's 17 autonomous regional governments lost their traditional role in driving forward local wind energy activity and some regions have suffered. In Galicia, which has conceded prospecting rights for developments totalling 2.3GW, central government has allocated just 210MW of new capacity to end-2012. The Cantabria region, which is finalising a 1.6GW invitation for proposals, has been allocated only 15MW (see table, left).

Not all regions have taken a hit. Catalonia, which has moved slowly over the past decade, received an allocation of 1.04GW, 16.5% of the national allocation for 2009-2012 and more than double its previous cumulative total.

Spanish firms dominate domestic market
(MW) (MW) SHARE (%)
Iberdrola Renovables 341 4,882 26
Acciona Energia 360 3,997 21
Edp Renovaveis 291 1,582 8
Eufer 247 862 5
Eyra 246 740 4
Endesa* 52 724 4
Olivento - 422 2
Enerfin 70 405 2
Gas Natural - 383 2
Others 852 5,152 27
Total 2,459 19,149
*215MW developed; 163MW of that sold to Acciona

Capacity allocations to 2012 by region
REGION 2009-2012 (MW) END-2012 (MW)
Andalucia 1,608 3,400
Aragon 140 1,889
Asturias 205 509
Cantabria 15 33
Canaries 2 136
Castile La Mancha 402 3,818
Castile and Leon 2,033 5,367
Catalonia 1,042 1,462
Galicia 210 3,355
Navarra 7 966
Murcia 110 262
Valencia 615 1,325
Rioja - 447
Basque Country - 153
Balearic Islands - 4
Total 6,389 23,126
Source: Ministry of Industry/WPM