The time for action and for proposing a new regulatory framework is approaching and the Spanish government is looking to calibrate what action it can take. This is the backdrop against which ever more rumours are circulating regarding a fixed tariff for all renewable technologies and the retrospective nature of new tariffs for photovoltaic output.
Various sources consulted talk of a meeting last Monday between the Industry Minister, Miguel Sebastian, and Ministry of Industry advisors and members of the socialist government, during which it emerged that the Government intends to establish a fixed tariff for all renewables. If confirmed, the measure would equate to reversing the path clean energies have followed over the last decade involving the approval of regulatory frameworks designed to ensure renewables competed side by side with other conventional technologies on the market. That was the intention of Royal Decree 436/2004, which replaced Royal Decree 2818/1998, the fixed tariff “bible”, which was rejected at the time by many renewables developers.
But the truth is that, to date, nobody knows for certain what the Ministry of Industry’s true intentions are. All sources say the rumour exists, but most think that it has been spread in order to test the water and gain an understanding of how the proposal would be accepted.
For José María González Vélez, President of the Association of Renewable Energy Producers (APPA), "What matters is not speculation, but that the rumour be clarified. The Ministry of Industry is far more concerned with the tariff deficit of renewables, and it appears to be giving in to pressure from the gas lobby. The gas lobby is very powerful, "he acknowledges. González Vélez regrets that different renewable technologies are fighting the battle on their own. "Here everyone acts according to their own interests. Members of the wind industry have their agenda, while the other technologies have another… The Government and the companies themselves promote disunity in the sector and the Ministry uses this at its will. "
Meanwhile, “the Spanish Wind Energy Association (AEE) is not aware of any text and has not been informed of these changes," says a spokesperson. “Nevertheless, any initiative that involves increasing regulatory instability is a step backwards and may damage the confidence of foreign investors in our country. Some of the ideas circulating could seriously affect the roll-out of renewables in our country.”
Valeriano Ruiz, President of Protermosolar, is among those who do not give any credence to the rumours. "I do not believe them. I would be surprised that the Government did something against the interests of an industry such as the solar thermal electric industry, which is in its infancy. It is a test of political waters; lies and deceptions propagated by an unknown party. The fact that the media is publishing these rumours is damaging. It is a pernicious game. "
Good, bad or indifferent?
The question that immediately arises is whether the change will be for better or worse. "Everything depends on how good or bad the fixed rate is," say most experts. Joaquín María Nebreda, a doctor of law and author of "Legal aspects of electricity generation under the special regime”. According to Nebreda, "Having a market price and a premium is far more transparent. The system has been deregulated precisely to do away with the tariff. If producers require individual support, then let them have it, but on top of the market price. This would offer much greater transparency to the system”. Nebreda recognises that “renewables are now in the spotlight. Experts believe it is an outrage that in 2009, the premiums (subsidies under the special regime), will cost the same as the cost of the network, and therefore, the regime will be reinforced if a fixed tariff is set. Market price plus premium on the other hand, could encourage a reduction in premiums".
In short, establishing a fixed tariff for wind, for example, would mean crossing it off the special regime once more, just as it is contributing more to cover demand than coal. It will also remove the downward pressure on pool prices applied by the wind sector, since wind-generated electricity enters the market at zero price, before it is adjusted to the average hourly price of the whole system. Ultimately, the final pool price could rise.
But some positive aspects do come out of this analysis. Instead of adjusting wind output with the main objective of generating the most profit on the final market, wind industry players will use their predictive models to schedule production to times of peak wind resource, rather than to when the greatest profits can be made. This will be the case as long as the penalties for deviations established in Royal Decree 661 are maintained.
Controversial mix, controversial premiums
Miguel Sebastian said in the House of Representatives last week that he hoped to have the support of opposition parties to deal with any adjustment to the premiums for renewables. "The remuneration of renewables has to fall into line with the rate of development required to establish the target energy mix for 2020, but it must also be compatible with the competitiveness of the industry," said the Minister, who recognises that it requires a "difficult balancing act".
The draft of the 2010-2020 Renewable Energy Plan sent by the Ministry of Industry to Brussels earlier this year indicated that “in 2020, renewables in Spain would account for 22.7% of final energy output and 42.3% of electricity generation”. Even renewable associations have acknowledged that this target of 22.7% is satisfactory, though all have called for it to be increased. APPA, to 30%.
They are not alone. The Directorate-General of the European Commission, Phillip Lowe, who took part last week in the opening of the High-Level Seminar on Renewable Energies, held in Pamplona by the Ministry of Industry and the Regional Government of Navarre, as part of Spain’s EU Presidency, believes that "we must be more ambitious" and spoke about a 50% target for renewables without establishing a timeframe. The challenge now concerns "smart infrastructures and grids”, which will be included in a plan this year. Lowe also referred to the mandatory targets, "with penalties for countries that do not fulfil them." According to Lowe, "based on the draft national renewable energy action plans, a target of beyond 20% is possible and could even be doubled, based on the example of Germany, Denmark and Spain."
Spain’s Secretary of State for Energy, Pedro Marin, who participated in the opening of the seminar in Pamplona, referred to "the essential role of the electricity interconnections in rolling out renewable energy and the importance of having a sufficient number of interconnections across European to facilitate the integration of renewable electricity output and optimise cost". The Spanish Presidency considers that the European targets on renewables "may be jeopardised if there are insufficient interconnections between member countries."
Marin also underlined the importance of the plan to provide financial support for the technological development of renewables, the SET Plan, as well as the potentially key role electric vehicles could play. Nevertheless, he made no reference to Spain’s national renewables action plan, which like other Members States, has to be submitted by 1 July. Other Ministry of Industry representatives also neglected to refer to the plan, unlike Poland, Denmark, Sweden, Austria and Portugal among others. Miguel Sebastian, meanwhile, did not even attend the gala dinner in Pamplona. Is this low profile a symptom of the Ministry’s approach to renewables?
"The energy sector is at war, due to falling demand. Major corporations see renewables as a problem and are pressing the Government. They do not like the energy mix presented by the Ministry, which merely translates into figures Spain's commitments to the EU Renewables Directive through the 20-20-20 plan; in other words, that Spain meets 20 % of final energy consumption in 2020 using renewables, and 10% of energy consumption in the transport sector. It is time to choose whether we want to continue as before, with a model based on conventional sources, or if we want another model based on renewable "concludes Garcia Breva, President of the photovoltaic section of APPA.
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Spanish Ministry of Industry, Tourism and Trade
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