Reforms in the Spanish electricity sector will hurt wind power developers

Share |

14 February 2013, Electricity, Nuclear, Solar, Wind

oilandgasobserver archive

At the end of 2011 Spain had the world's fourth largest installed wind capacity at 21.7GW, but at the price of a significant deficit of nearly $38bn due to generous subsidies.

To cap this debt, in early 2012 the government suspended subsidies for new renewable installations. After imposing a power tax early this year, it now aims to restrict the pricing options for renewable power producers. The government envisages an annual saving of $1bn as a result of these reforms.

Slamming the brakes on renewable power support has unsurprisingly resulted in sluggish growth for turbine manufacturers. Since 2012 there have been no new wind projects approved, and manufacturers have not received any orders for wind turbines. Datamonitor notes the closure of some turbine manufacturing facilities in Spain and losses for the largest manufacturers such as Gamesa, with its domestic market contributing only 8% of its total sales in 2011.

During the first half of 2012, only 413MW of wind capacity was installed and almost 900MW of new capacity installations suffered construction delays. To diversify, manufacturers are now focusing on proven profitable business lines like operation and maintenance (O&M) services. In a recent bid, Gamesa won a contract from EDP to provide O&M services to 13 wind farms operational in France, Spain, and Portugal. Companies are also exploring emerging markets in Latin America and Asia Pacific, from where they expect to generate 40% of total demand in 2013.

Datamonitor anticipates that current regulatory uncertainties and shaken investor confidence will slow down growth in the renewables sector. These government reforms are likely to result in Spain missing the 2020 target of 40% electricity generation from renewables.

For more information contact:
Datamonitor Energy
Ask an analyst:
Follow Datamonitor on Twitter: @DatamonitorEN

Source: MarketLine

More Electricity Commentary

More Nuclear, Solar, Wind Commentary

Recent commentary