Spanish wind sector thrown into disarray by government plans

SPAIN: The Spanish wind industry is potentially in a state of flux following reports the government is planning to end the sector's production incentive in a cost cutting exercise.

Spanish central industry minister Miguel Sebastian
Spanish central industry minister Miguel Sebastian

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Following the industry minister's reported intention of ending the sector's wind production incentive to save the electricity system money, the Spanish wind industry is containing its outrage, pending clarification. According to reports, central industry minister, Miguel Sebastian, informed regional industry bosses of the change in a meeting on April 12.

Sebastian is believed to have said he will force all renewables production back into a fixed feed-in tariff regime; the mechanism that dominated the Spanish wind market up to 2004. The incentive mechanism that followed it now draws over 95% of wind capacity to programme and trade wind on the wholesale electricity market.

National wind association, Asociación Empresarial Eólica (AEE), believes the incentive is the main driver towards sophisticated grid integration and has long opposed any suggestion of a return to the previous system.

The AEE says it has received no formal indication of Sebastian's plan but, if true, "wind development in our country could be seriously damaged". The association declined to comment further until meeting with the ministry, which it hopes to do "very soon". 

In response to the rumours the ministry's press office said it  "not discuss rumours". Still, it points out the 2004 regulation schedules 2010 as the year for designing a new pay scheme for renewables, with application after 2012. "The ministry has been analysing the situation for over a year and we are still working on it," the spokesperson said.

AEE staunchly opposes any suggestion of a return to a feed-in tariff. The incentive is not only more profitable, it says, but also the main driver of Spain's sophisticated degree of wind integration. AEE holds Spain as world leader in hourly wind production programming, wind turbine capacity to ride through sporadic grid faults and real-time monitoring and emergency override control of all wind plants over 10 MW by the national grid operator, Red Eléctrica de España.

"The press reports are sound but only tell part of the story", said one veteran wind lobbyist, preferring to go unnamed. "Apart from throwing wind back into the dark ages of protected tariffs, what nobody has pointed out so far is that the intended feed-in tariff is EUR 76 / MWh. That is what has come down from regional industry bosses." The rate marks a EUR 10 / MWh drop on the minimum price currently achieved on the market. The new rules will be applicable to all capacity, new and existing alike, as of 2012, when current regulation expires. 

Existing rules

The reported feed-in tariff represents a big drop compared with current wind power sales on the wholesale electricity market. Under existing rules, capacity already online by end-2007 receives an index-linked production incentive, established in 2004, and currently at EUR 38.29 / MW. That is paid in addition to the constantly varying hourly wholesale market price, regardless of how high that price goes.

For capacity connecting from the beginning of 2008 onwards, the same incentive is paid. In that case, however, the combined market price and incentive must not exceed a cap set at EUR 87 / MWh.

Existing rules also include a feed-in tariff alternative, set at EUR 75 / MWh. That option is only used by operators of new capacity that have not had time to set up brokerage on the wholesale market. Given the beefier profits on the wholesale market, those operators later switch to the production incentive option, a move the regulation allows them to do once only. Operating under the feed-in tariff has not exceeded 5% of the national total since 2006.

In all cases, the rules were scheduled for review this year, with any modification applicable at the beginning of 2012.

Last year, wind was Spain's third biggest generator, covering 14,3%  of demand and trailing only combined cycle gas generation (30.4%) and nuclear power (20%). "Wind is mainstream; bigger than coal [12.7%]. Now is not the time to treat it with special status," says Luis Merino of Energías Renovables', which reported the story.



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