Wind Energy in Spain

spain.jpgThroughout 2016, wind power was the second source of electricity generation in Spain. In February, wind power was the largest source with a share of 30.2%.

The Energy Planning of the Government, which committed to install about 6,400 MW of new wind capacity and invest about 7.5 billion EUR (8.51 billion USD) to meet European targets for 2020, is delayed.

The Spanish wind sector installed only 38 MW during 2016 [1]. In a February auction, 500 MW of wind power capacity was allocated in contracts with no subsidy over the market price. A second call was approved with new contractual parameters for 450 MW planned for the Canary Islands after allocating only 15 MW in the first call. In 2017, industry will publish auction conditions for another 3,000 MW of wind power capacity.

National investments for wind related R&D totaled 85.5 million EUR (90 million USD) in 2016.

National Objectives

Spain’s electricity sector reform in 2012 interfered with the 2011 target for 35 GW of wind power capacity through the National Renewable Energy Action Plan (NREAP 2011-2020) [2]. The reform significantly reduced incentives for existing wind farms; this regulatory uncertainty led to a dramatic reduction in new projects.

Renewable Energy Targets

According to the Ministry of Industry, Energy and Tourism’s 2015 energy planning exercise, renewable energy sources should satisfy 36.6% of Spain’s gross energy generation by 2020. This target will likely be achieved with the most competitive technologies: wind and solar PV energy. However, all clean energy technologies compete in the government’s technology-neutral auctions.

Spain’s wind power capacity forecast is 29,400 MW. To meet the national target, the country will require 6,400 MW of new capacity by the end of 2020.

Policies Supporting Development

In October 2015, the government negotiated with the wind sector on the Wind Industry Relaunch Plan (PRIE), a 15-point cross-ministry program aimed at boosting the country's wind industry export value by 35%, to 3 billion EUR (4.6 billion USD) annually.

At the end of 2015, the government decided to consider promoting new renewable projects. The basis of a “reasonable return” of 7.4% for renewable projects commissioned after 2004 was established. Then in 2016, the government implemented auctions to support renewable energy in Spain with a focus on the reduction of the total capital expenditures (capex) for the installation. The maximum investment retribution for bidders was established at 63.243 EUR/MW (66.58 USD/MW).

The baseline capex amount is 1.2 million EUR/MW (1.26 million USD/MW); bids below this amount will not receive remuneration. Spain established the baseline capex using a reference wind facility with the “reasonable return,” capacity factor of 2,800 equivalent hours per year, 20-year expected lifetime, and a baseline operating expenses (opex) of 24.95 EUR/MWh (26.27 USD/MWh) for the first year.

More than 6,000 MW registered for the February 2016 auction for 500 MW, creating high competition among bidders. The auction attracted independent developers such as a small power generation company (300 MW) and a meat processing company trying to diversify (102 MW). Eight small developers were accepted. Each bid was under the baseline capex of 1.13 million EUR/MW (1.19 million USD/MW) and forewent any subsidy.

Possible reasons for rejecting the subsidy bonus could include the long list of old, partially developed wind projects that were stopped due to the energy reform. Major developers believe it is not possible to promote viable wind farms without subsidies.