Although Spanish renewal of government-backed clean energy initiatives marks a step in the right direction, vicious subsidy cuts between 2010 and 2013 mean that investor confidence will be difficult to win back according to the latest findings outlined by industry intelligence service A Word About Wind in its Finance Quarterly Q4 report. Moreover, with just two out of thirty legal challenges from overseas investors in the previous boom resolved, there are still big questions for would-be investors about Spain's stop-start policymaking.
The report forms the latest analysis published exclusively for its rapidly expanding international membership of energy developers, financiers and investors. The financially focused, quarterly investor report series provides an exclusive insight into key M&A transactions, data on the most notable deals of the past three months, economic country forecasts and unrivalled investment analysis, four times a year.
A key focus of this edition is the Spanish market, hopeful in some ways yet deeply uncertain in others. Devastating retroactive cuts to subsidies in 2011, as part of a series of austerity measures intended to help Spain recover from the 2008 financial crash, crushed Spain’s wind market. The year 2015 failed to see even one MW of renewable energy added to the Spanish grid. However, in May and July of this year, Spain awarded the rights for 4 GW of new wind energy projects, to be completed by 2020.
Ostensibly, this is good news, but the auctions came as a surprise to many in the industry and are accused of creating unrest and disorder. Spain clearly has some way to go in order to reassure investors, once so badly burned, and to create a climate which is conducive to development.
A Word About Wind’s latest investor report highlights the uncertainty which still threatens to hinder investment in the Spanish renewables industry. Returns remain capped at 7.39 percent but are due for reappraisal in 2019, with many fearing they could be cut as low as 4.5 percent. In addition, auction schemes must reach financial close by 2020, a particularly tight time frame for wind projects, which traditionally take much longer than solar to reach project completion.
“The Spanish government may have been able to create an immediate boom in renewable energy projects through these auctions, but the greater challenge lies in convincing investors that they can trust the government again” said Richard Heap, Editor, A Word About Wind. “A long-term, coherent plan is required to give investors the security of foresight and to allow them to prepare for upcoming policy changes”.
Adam Barber, Managing Director, The Tamarindo Group, of which A Word About Wind forms a key part, added that the drastic cuts suffered by Spanish renewables projects in 2011, which continue to cast a shadow over the industry today, are compounded by current fluctuations in policy which threaten to be just as damaging. The uncertainty of not knowing how low the returns cap could be pushed, and the anxiety of working on such tight time schedules without the benefit of forewarning, are likely to discourage even new investors from getting involved.
The investor report contains an exclusive interview with Laura Beane, CEO of Iberdrola subsidiary Avangrid Renewables, as well as in-depth analysis and a breakdown of the largest M&A deals completed this quarter.
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