Spanish wind energy put at risk by Government

Both the new model as proposed economic conditions prevent new wind turbines plants are installed and fulfilling the targets set for 2020. The spanish wind energy industry calls on the Government to reconsider its position to avoid a de facto moratorium in the coming years.

The Ministry of Industry, Tourism and Trade (MITT) has sent to the National Energy Commission (CNE) the draft royal decree that will establish the compensation of wind energy activity without having previously reached an agreement with the sector, compared to what was advertised.

This regulatory proposal is far from the discussion during the negotiations between the wind power industry and the MITT, and is unacceptable in terms of model and in regard to economic conditions. The spanish wind energy industry believes that if it goes ahead, will have serious consequences such as loss of thousands of jobs, the relocation of wind turbines factories, industrial tissue destruction, loss of confidence among domestic and foreign investors, and the discomfort of the autonomous communities, among other things. Therefore calls for the Government to reconsider its position.

The draft Royal Decree establishes a path for installation of 1,400 MW annually to meet the goals of 35,000 MW under the Renewable Energy Plan (PER) 2011-20. However, the wind energy sector considers that under the proposed economic conditions, these goals can not be achieved because no reasonable guarantee the profitability of wind farm projects, the installation of wind turbines is not viable.

Thus, although the wind power sector take months to claim the urgency of a new regulatory framework that dictates the rules of the game beyond the December 31, 2012, considers that the proposal sent to the CNE would have a similar effect for the sector: a moratorium de facto over the next years.

The highlights of the draft Royal Decree are the following:

-Change model. Contrary to what has been discussed for months with the wind power sector and which has publicly expressed, MITYC proposes to radically change the existing model, considered by the European Commission as the most economically efficient European Union. Proposes a system of variable premiums by the time they will automatically be lowered for all wind farm plants built under the umbrella of the new regulation if they exceeded the annual quotas. Both the wind energy sector and the banks surveyed by the Business Wind Energy Association (AEE) believe that this model may not have access to funding, since it would introduce such volatility in calculating the compensation that would prevent the return of a wind farm during its lifetime.

-Economic conditions unacceptable. The parameters proposed by the Spanish Government does not ensure reasonable profitability of wind farm projects. The most significant is that it is limited to twelve years versus twenty current perception of the premium charged for wind turbines facilities only premium during the first 1,500 hours of operation, the premiums will not be reviewed in line with inflation, as is done today. Furthermore, although the concept remains a land payment, it will be reviewed annually by the Government, which would introduce even more volatility. All these conditions together would create a reduction of about 40% of the fee provided for in Royal Decree 661/2007 for the facility after 2013.

-Discourages repowering of old wind farm plants. Despite the insistence of the wind energy sector, industry has decided not to encourage the upgrade, which involves the replacement of old wind turbines by more modern ones in the wind farms that are in the best locations. On the other hand, it provides solutions to pending problems, such as wind farms listed in the Register of Pre-allocation problems that have to be built before the deadline date (31 December 2012) for reasons other promoters and often the result of the changes approved by the Government itself on Network Infrastructure.

The wind power industry believes that if this proposal goes ahead under conditions that has been sent to the CNE by emergency procedure, it will open one of the worst possible scenarios for the wind sector, which employs over 30,000 people, is a 0.34% of GDP, exports technology for over 2,000 million euros and imports of fossil fuel saving of 1,500 million euros a year, among other things.