The agreement reached on July 2 between the Wind Energy Association (ESA) and the Ministry of Industry may involve a retroactive cut by 35% in the premium paid for the production of 25% of the Spanish wind energy, and also break with the promise of economic stability that attracted investments in its day. But at the time the agreement becomes a long-term visibility of the economies of the sector.
The pact, for that reason, was greeted with enthusiasm by investors in the stock market. At the end of the meeting on Monday, July 5, the values of renewable listed companies experienced a very marked rebound rises 7.39% in the case of shares, and 5.06% in the case Iberdrola Renovables. Also, Renta 4 analyst commented that if the agreement is ratified in the coming days, “would eliminate regulatory risk has been weighing on the sector of renewables.”
For its part, pending a detailed public statement, ESA has merely stated that “the wind energy sector has been an effort of accountability to the current situation in exchange for greater regulatory stability.” Specifically, the agreement marks a reduction of 35% of the premium reference only applicable to those installations covered by the RD 661, 2007, starting from January 1, 2008. It is estimated at about 25% of the park.
The reduction will take effect from the next final approval of the agreement until the last day of 2012. Thereafter, the premium back to current values, according to the original criteria of the RD 661. The new power to start from January 1, 2013 will be subject to re-write rules yet but, according to the ministry, will bring profit rates “reasonable.” Thus, the ministry said, “This agreement is also enhancing the visibility and stability of the regulation of these technologies in the future, guaranteed bonuses and RD 661/2007 current rates for facilities in operation (and for including in the pre-registration) from 2013.”
A hundred million savings for the system?
In addition, several industry sources noted that the cut will not have limited significant economic effect for the following reasons: the reference premium only comes into play from a wholesale electricity market price of 45 euros per MWh. Currently, the market price is below this figure, in which case, according to the RD 661, the wind received by the scheme receive a floor price of 75.1 euros MWh. “We do not charge more premium market price until the market exceeds 45 euros, what we are charging for months is simply the minimum price set by the 661,” a trader said, adding that “the cuts will not take effect until the market exceeds 45 euros.”
Therefore, a member of ESA operator estimates that predicted by the market, it is difficult to reach 100 million savings to the electric system to the pact. “In euros, this is not going to affect us. In image it affects us, since, for little that is cut, it goes against the supposed guarantees of 661, safeguards against political interference in the returns, which establishes a dangerous precedent towards attracting new investment.”
Only 5% of the tariff deficit is the responsibility of the wind
According to ESA, the wind will be up only 5% of the tariff deficit and therefore can not be “neither the cause nor the solution thereof, as declared Jose Donoso, president of the association, a few weeks ago. In any case, according to the chairman of Iberdrola, Ignacio Sanchez Galan, the covenant back to provide visibility and stability to the sector following the freeze on new investment for months.
Regarding other aspects, the agreement has resolved the impasse of the 300 MW installed before the call last year from the Register of Pre-allocation and not able to register in the register. Now, those facilities may choose to sell at market prices without premium, since the entry into force of new regulations and collect fees from unoo January 2012 or, alternatively, to sell to the market since the entry into force of the new regulation and charge the market price plus the premium since January 1, 2013. Additionally, the agreement provides for a special call for 160 MW pilot/R&D for wind technology, which counted in the quota of 2012.