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Auctions give Spanish wind power room to breathe again

OPINION | After years of inactivity, a new tender-driven policy is finally helping Spain's wind industry get moving again, writes Juan Virgilio Marquez 

Tendering is once again a hot topic within the Spanish energy sector. 

After months of analysis by industry of what proved to be an extremely complicated market design that led to different conclusions at every stage, a 3GW technology-neutral tender took place last month, with wind power being the big winner.

In order to understand the results of the tender it is important to take into account the overall context of the auction. It very much started off as an isolated event, with no one in the industry expecting it would be announced a week later that a second 3GW renewables auction is to be held before the summer.

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It was the initial expectation that this would be an isolated auction which was a big pull factor for developers with advanced wind projects looking for some sort of stabilised revenue regime. Under the Spanish system of regulation the economic parameters are changed every three years.

Secondly, the three year standstill in new renewable energy activity triggered by retroactive cuts – coming after a long period where Spain used to install over 1GW a year – meant there was a market appetite for new investments. This was particularly true for wind projects which had reached a certain advanced level of maturity.

It is important to take into account the fact that even if the winning projects will not get incentives it doesn’t mean that the 23GW of current wind capacity in Spain will not need such support in the future, as it was built in an era of less technological maturity, with higher costs, and in a different financial environment.

The result of last month’s tender has finally given the Spanish wind sector some breathing space, particularly its manufacturing and industrial companies, after several years of little domestic activity. The so-called green moratorium of 2012 had stopped new projects being installed under the feed-in tariff system then in place, leaving developers with lots of projects on their hands.

"The result of last month’s tender has finally given the Spanish wind sector some breathing space"

Although it will be a big challenge for the industry to meet the December 2019 deadline for the awarded projects to come online the Spanish Wind Energy Association is confident all players involved will be up to the task. The government needs the projects to be on time so it can comply with its 2020 EU renewables targets.

Spain is also debating how it will achieve its 2030 EU goals on climate, renewables and the future energy mix, with new parliamentary legislation expected this year. In fact, we are right now in the middle of the dialogue that will lead to a Climate Change and Energy Transition law that sets out future energy planning, taking into account both energy and decarbonisation needs. The fact that different players are being included in the debate is important.

This law necessarily implies some long-term encouragement for renewables investors, with a tender calendar that will help compliance with our commitments to Europe’s 2020 and 2030 goals, and the Paris climate change agreement. In the meantime the wind sector welcomes news of a second 3GW renewables auction announced by our Prime Minister Mariano Rajoy at the end of last month.

Juan Virgilio Marquez is chief executive of Spanish wind energy association AEE

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