Spain plans to ramp up solar and wind energy and phase out nuclear and coal-fired power stations, creating incentives for speculators to pounce on the rights to a limited number of grid connection points
MADRID: Spanish authorities fear that a speculative rush threatens to hold back the development of renewable energy, saying coveted rights to connect to the national power grid are being secured with the sole aim of selling them on for a profit.
Spain plans to ramp up solar and wind energy and phase out nuclear and coal-fired power stations, creating incentives for speculators to pounce on the rights to a limited number of grid connection points.
Speculators are securing permits to pump power into the grid, which are currently available in exchange for a financial deposit and loose controls on their ability or intention to build a plant, the national competition watchdog has warned.
“Some developers hoard the scarce capacity available with the aim of speculating with it, delaying or paralysing the installation of viable projects,” the CNMC watchdog said in a regulatory proposal last month.
But regulator and industry calls for a legislative crackdown have failed to translate into action because of a political stalemate in Madrid. More than two months after inconclusive national elections, the government headed by Socialist leader Pedro Sanchez is still in caretaker mode.
The government suspects some applicants for the permits who have no experience in the industry just want to trade them, Secretary of State for Energy Jose Dominguez Abascal told Reuters, saying the sector needed a decree to include rules based on the principle that permit holders show proof of use.
“The way to regulate this is to oblige people who have requested a permit to meet certain milestones, make progress in specified time-frames, so that no one can keep a permit in a drawer, waiting for someone to come and buy it,” he said.
If all the permits requested from grid operator Red Electrica so far were translated into real projects, Spain would have enough renewable power to run 84 million households, four times the country’s actual number of homes.
Dominguez said the mass requests could get in the way of future development, frustrate work to upgrade the grid, and keep the price of energy high for consumers.
However, the many viable renewable projects already underway, with paperwork in order, would not be affected, Dominguez said, adding the government hopes to act before any problems begin.
Requiring permit holders to meet specific deadlines would start to clear the backlog of speculative requests within a year of the planned rules coming into force, Dominguez said.
To give an idea of the potential savings to be made from switching to renewables, he said, wind and solar energy can be produced in Spain for around 36-40 euros per megawatt hour. Spain’s baseload electricity contract for 2020 delivery is trading at around 56 euros per megawatt hour.
HIGH PRICES
High demand has pushed up returns from selling projects in the development stage, executives in the industry say.
Tomas Garcia, managing director for solar and wind projects in Spain and Portugal at renewable energy group BayWa r.e., said Spanish solar projects were attracting particular attention.
“There are very few projects that are truly at the ready-to-build stage and there is a great deal of appetite for them, so prices have risen very high,” Garcia said.
Four other industry sources told Reuters on condition of anonymity that they had seen projects put on the market for around 100,000 euros ($112,000) per megawatt.
One of those sources said he had been offered a project that was ready to build, with all the necessary paperwork in place, for 250,000 euros per megawatt, some six times what he would have considered a reasonable price before the bubble started.
Opportunists without funds of their own are looking for investors, said Miguel Angel Martinez Aroca, president of small and medium-sized solar energy producers association Anpier.
This contingent “is going to build absolutely nothing, but is dedicating themselves to requesting evacuation points, looking for land and bringing down the sector and the market”, Aroca said.
“Once they have managed the very basic process to get a folder with five documents, they look for an investment fund that has the financial capacity, and offer them the folder.”
A massive roll-out of renewables is high on Spain’s agenda as consensus builds among European Union leaders to agree on balancing out the bloc’s carbon emissions to net zero by 2050. For now, all the Socialists can do is “have everything ready for the day when there is an effective government, with no limitations, and implement all the regulation”, Dominguez said.
If Sanchez does manage to form a government, developers can expect to face five deadlines to show their plants have reached certain stages.
“We feel the urgency, because we want to launch auctions soon, to develop renewables in Spain and reduce the price of electricity,” Dominguez said.
“We have a climatic and an economic obligation. We want this to happen soon, and to make it happen we need to resolve this issue.”
Source: Reuters
