Development & Aid, Energy, Environment, Europe, Global Governance, Headlines, Latin America & the Caribbean, Tierramerica

Spain’s Renewable Energy Heads West

Clarinha Glock* - Tierramérica

BARCELONA, Jul 22 2010 (IPS) - Plagued by Spain’s economic recession and subsidy cuts, renewable energy businesses are following the sun and wind to Latin America in search of profits.

Photovoltaic energy field in La Rioja, Spain.  Credit: Courtesy of T-Solar

Photovoltaic energy field in La Rioja, Spain. Credit: Courtesy of T-Solar

In 2009, the wind energy companies of the Madrid-based AEE (Asociación Empresarial Eólica) reached 1,274 megawatts installed capacity in Latin America. At the head of the list was Mexico (650 MW), followed by Brazil and Chile.

The plan is to expand to Argentina (700 MW), Peru (110 MW) and Venezuela (100 MW), with additional investments in Mexico and Brazil.

“A recent study shows that by 2025 the investments could reach 46,000 installed MW” in Latin America, the Association’s energy policy director Heikki Willstedt Mesa told Tierramérica.

The firms are betting on the long term, hoping for hikes in the prices of carbon credits granted under the Kyoto Protocol to fight climate change, in force since 2005. That accord is expected to form part of a new international treaty on global warming.

Those carbon credits serve as a market mechanism for promoting clean energy — sources that do not generate greenhouse-effect gases like carbon dioxide produced from the combustion of fossil fuels.

The cost of wind energy is determined by the yearly hours of wind strong enough to produce the turbine’s nominal potential, or its “load factor,” explained Willstedt Mesa.

If the load factor is more than 30 percent, the cost of energy production would be between 60 and 70 dollars per megawatt/hour (MWh).

“With those costs, nearly all countries would be able to compete with conventional sources like petroleum,” he said.

To make wind parks more profitable, incentives have been established, paying more for “clean” megawatts than the market price.

In Spain, the renewable energy sector receives those incentives because its production generates almost no carbon dioxide (the leading greenhouse- effect gas) and few other contaminants.

This subsidy has been in place since 1994, and is paid through a fund that collects directly from the Spaniards’ utility bills and transferred to the energy- generating companies.

“Even with the adjustments for the economic crisis, those investments should be maintained, because Spain is one of the world leaders in renewable energy, not just for installed capacity, but also for its established industry,” said Willstedt Mesa.

Spain’s wind energy industry is well rooted: the 240 companies affiliated with the Association are turbine factories, parts providers and park builders throughout the country.

The installed wind energy capacity in Spain is 19,000 MW, and last year it supplied 13.5 percent of national demand. The European Union as a whole totals 74,000 MW installed, equivalent to investments of 113 to 126 billion dollars.

The EU’s goal for renewable energy sources to generate 230,000 MW within the decade.

But the Spanish authorities are studying a new regulatory framework for the energy sector that would include cuts both to subsidies for clean technologies and to polluting sources, like coal.

With that possibility on the horizon, Spain’s solar energy sector is also looking towards Latin America.

This year, the Spanish firms T-Solar and Solarpack won contracts for the production and sale of 173 gigawatts/hour (GWh) annually of photovoltaic energy in bidding opened by the government of Peru.

The plan encompasses four solar fields with a capacity of 20 MW each, to be up and running before Jun. 30, 2012, with a total investment of 250 million dollars.

T-Solar will promote and run two of them, and the rest will be under a consortium of T-Solar and Solarpack together.

The contract, signed in March with Peru’s energy and mining supervisory body, OSINERGIM, establishes that the solar energy fields will be located in the regions of Tacna, Arequipa and Moquegua, in the country’s far south.

The exceptional sunshine in that region, with an annual average of 2,300 kilowatts/hour per square metre, was a deciding factor in choosing Peru, T- Solar’s international business director, Enrique Barbudo, told Tierramérica.

Another attractive element is the conditions of the 20-year contract: the national electrical system will purchase all the electricity generated at a guaranteed price, with annual reviews.

Peru is one of the countries in the region enjoying greatest economic growth. Energy production doubled in the last 14 years, according to the National Mining, Petroleum and Energy Society, and this year alone is expected to see a six-percent increase in demand for electricity.

The authorities want renewable sources to provide 1,314 GWh annually by 2012. Of that total, 181 GWh would come from solar technology, 813 GWh from biomass and 320 GWh from wind.

Solarpack has a presence in Chile, France and the United States. T-Solar has expanded to France, Italy and India, and is exploring new projects in Chile, Brazil and Mexico.

Meanwhile, there is a great deal of uncertainty in Spain. “We are developing what we already had under way, and we’re waiting to clarify the future regulatory framework in order to make decisions,” said Barbudo.

Spain’s clean energy subsidies were adopted with the idea that by 2020, renewable sources would provide 20 percent of the electricity — a goal of the EU.

But that will depend on a variety of factors, says businessman Willstedt Mesa. For example, the size of the subsidies, compliance with the EU’s aim to cut carbon emissions 20 percent by 2020, or even by 30 percent, and the behaviour of petroleum, natural gas and coal prices, he said.

(*This story was originally published by Latin American newspapers that are part of the Tierramérica network. Tierramérica is a specialised news service produced by IPS with the backing of the United Nations Development Programme, United Nations Environment Programme and the World Bank.)

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