sou · GWB313d2 · 2009-01-01 00:00:00 — This plan identified a technical potential for wind power in in the range of 7,500–15,000 MW. The plan proposed an increase of 8,140 MW (compare with the capacity installed of 834 MW year 1998) and a wind power production of 19,536 GWh/year to year 2010. The target for the year 2006 was 5,550 MW installed wind power capacity. How- ever, by the end of year 2005 there were 10,028 MW installed wind power capacity, which means double as much as the target of the PFER for 2006. The PFER was updated with the Plan de Energías Renovables, PER, approved in the year 2005. The PERTPF11FPT defines the political targets for the period 2005–2011. The political target for wind power established by the PER is 20,155 MW installed capacity by 2010. During the years 1993–1994 the cost of capital (interest rate) was very high, about 16–, some years later this cost decreased and it happened at the same time as a stable regulatory frame was develop- ed which resulted in a great development of the wind power sector. The feed-in tariffs and premiums have been modified every fourth or fifth year. However, there have not been drastic changes since 11TP PT Plan de Energías Renovables en 2005-2010, IDAE. rdonlyres/C1594B7B-DED3-4105-96BC- 9704420F5E9F/0/ResumenPlanEnergiasRenov.pdf all political parties have supported the development of renewable energies. The political stability has played a crucial role for the development of the wind power sector in . In the development of the wind power sector goes in the direction of larger wind farms connected directly to the transmission grid. There are two reasons behind this development. The first reason is the technical development and the second reason is the available capacity in the transmission grid to transport the produced electric power from the connection points. The first wind farms from the year 1997 and 1998 were composed of wind turbines with a capacity of 600 kW connected to the distribution grid. Nowadays, the tur- bines have an installed capacity of around 2 MW which means that it is possible to connect significantly larger capacity in the same location. By connecting larger capacity, more electric power is ex- pected to be produced and therefore a larger income is expected. This means that larger investments to connect the wind farm to the transmission grid can be made. However, since there is a limitation of 50 MW to get the highest payment (see Section 1.1.3), larger installations are divided into several 50 MW installations. One reason for investing in larger wind farms is to take advantage of scale economies regarding for example the licensing procedure, since the number of licenses required are almost the same indepen- dently of the capacity to be installed. The first wind farms were located at the mountain peaks but the technical improvements led to an increase of the efficiency of the wind turbines that made it possible to also build wind farms in other locations with less wind resource. In wind power developers have tried to utilize those loca- tions with best wind resource such as mountain chains in the North, Aragón and basins of the concentrating the greatest number of wind farms in those areas. Year 2001 there were about 3,200 MW installed wind power capa- city and the proportion of wind farms connected to the transmission and the distribution grid was very different compared to the situa- tion in 2007. By year 2001, only 10%TPF12FPT of all wind farms were connected to the transmission grid while by 2007, according to Figure 1-6, of all wind farms were connected to the trans- mission grid. Most of the wind farms connected to the distribution grid are connected to the level, see Figure 1-6. 12TP PT Personal communication with REE Figure 1-6 Voltage levels at which the wind farms in are connected by 2007. Potencia eólica puesta en servicio (MW) en el SEPE, según el nivel de tensión (kV) de conexión Source: REE, 2007 The different regions have developed different policies regarding the development of the wind power sector. The region of has the largest amount of wind power capacity installed followed by Castilla León and Aragón while Andalucía, Cataluña, and remain last in this development. There are regions where the environmental issues have stopped the development of the wind power sector like for example Cataluña. There have been different ways of allocating the connection capacity in the different regions to the different project developers such as tender procedure. Most of the regions in compete to develop wind projects be- fore the national target of 20,155 MW installed capacity is reached. The wind power sector has created approximately 35,000TPF13FPT job opportunities in . The regions have different requisites relating the creation of employment for giving the administrative licenses, i.e. the licenses for constructing, modifying, or closing wind farms. power production gives increased incomes to the municipality where the installations are located since they have to pay a tax on economical activities of about of the income of the installation. 13TP PT Eólica 2007, page 87. Asociación empresarial eólica, This might play a role in increasing the local acceptance of wind power. 1.1.6Possible Barriers for the Future Development of the Sector in According to the interviewed agents of the wind power sector in the target of 20,155 MW installed wind power capacity is most likely to be fulfilled. However, it is more uncertain whether this capacity is going to be build by 2010 as stated in the political target in the PER. The reason behind a possible delay is not the lack of investment but the possible lack of transport capacity in the grid to transport the produced electric power. The construction of the required infrastructure takes long time to complete. The bottleneck in the development of wind power projects have changed according to a project developer in . In the earlier stage, the bottleneck was the administrative licensing issue while nowadays the bottleneck is the connection issue. In the PFER it was already established a target for wind power of approximately 10,000 MW to year 2010. Some of the reinforcement works in the transmission system, necessary to transport the electricity produced by those 10,000 MW, have been delayed. This means that even if there are investors, some projects cannot be materialized as con- sequence of the lack of capacity in the grid. In the region of Castilla León, for example, there are project developers that have started to build wind farms but these will not be able to start producing electric power until the infrastructure between Castilla León and has been built. After the Royal Decree 2818/1998 was approved electricity producers based on renewable energy sources with a capacity below 50 MW have the possibility to choose between two different payment options since. These options are: Fixed regulated feed-in tariff Market option (combination of the electricity market price together with a fixed premium). However, solar producers have only the possibility to receive feed- in tariffs. Producers in the special regime can freely choose pay- ment option but the decision taken is for at least one year. Up to year 2004, the number of wind power producers choosing the market option was very smallTPF14FPT. However, the publication of the RD 436/2004 including an incentive for the market option and rising electricity prices led to a huge increase of wind power producers choosing the market option. The high electricity prices resulted in much higher payments than expected for the producers who had chosen the market option. This has led to one of the major changes introduced by the new legislation adopted in 2007, RD 661/2007, namely the of price caps and price floors for the payment to the producers included in the special regime choosing the market option. Those caps and floors secure a mini- mum income necessary to recover investment costs and limit the premium to zero when electricity prices exceed the cap value. In order to illustrate how the market option is constructed let us look at an example of an on-shore wind power producer choosing the market option. Lets assume a market price of 3 c/kWh, then the sum of the market price and the premium (see Table 1-1) is 3+2.93=5.93 c/kWh. Since 5.93 is lower than the price floor for wind power which is 7.13, then the wind power producer receives the floor value. If we now assume a market price of 4.5 c/kWh, then the wind producer receives the sum of the market price and the premium, i.e. 4.5+2.93=7.43 c/kWh. If a market price of 6 c/kWh is assumed, then the wind power producer receives the cap value of 8.49 c/kWh since the sum of the market price and the premium (6+2.93=8.93) is larger than the price cap. Note that in this case the premiums received by the wind producer decreases. If the market price is larger than the cap value, i.e., 8.49 c/kWh, then the wind power producer does not receive any premium but only the market price. The retroactivity of the tariffs and premiums has been a very con- troversial issue. The new Royal Decree 661/2007 defines a transitory period until year 2012 after which installations have to go over to the new payment scheme established in the new legislation. Electricity production from solar photovoltaic producers is grow- ing rapidly in since year 2005. As mentioned earlier, solar photovoltaic producers have only the possibility to receive feed-in 14TP PT Eólica 2007, Asociación Empresarial Eólica, 82. There are three different feed-in tariffs for solar photovoltaic producers depending on the installed capacity as shown in Table 1- 1. Unlike in and there are no different feed-in tariffs depending on whether the solar panels are located on a build- ing or directly on the ground. The highest tariffs are paid to those installations which has an installed capacity under 100 kW. There- fore larger installations are divided in installations under 100 kW each having its own transformer. This makes the limit of 100 kW meaningless. There is a direct connection between the political targets for each technology and the payment schemes defined in the new , RD 661/2007. This establishes that when of the political target is reached, then the Secretary General of Energy will establish a period within which registered installations will have the right to receive the feed-in tariff or premium defined for that technology. The period will be of at least one year. Installations registered after the period defined by the Secretary General of Energy will receive, in case of choosing the feed-in tariff option, the final hourly market priceTPF15FPT or, in case of choosing the market option, the market price and complements of the corresponding markets where the producer participates. Despite that, these installations will be taken into account when defining the capacity targets for the Renewable Energy Plan for 2011–2020. In the following, Table 1-1 shows the payment scheme for renewable electricity producers defined by the latest legislation pub- on 2007. 15TP PT In the final hourly market price it is included the market price (pool price) together with the prices of all other markets, intra-daily adjustment markets, balancing markets and capa- city payment. In 2007 the final hourly price was 4.498 c/kWh of which was the pool price, the intra-daily market prices and balancing markets and capacity pay- ment. Table 1-1 Payment scheme for renewable electricity production according to RD 661/2007. This payment scheme does not apply for in- stallations registered after the period defined by the General of Energy after of the political target is reached. Political targets are given for each technology in brackets. (871 MW) (371 MW) (500 MW) (20155 MW) (2400 MW) ((50-P)/40) 80*((50- P)/40) The values of the feed-in tariffs, premiums, incentives, caps and floors to be paid to power producers included in the special regime will be actualized annually with the consumer price index, IPC, minus 25 units up to and minus 50 units thereafter. Renewable energy producers receive an incentive for consuming reactive power during low demand periods in which the circulation of reactive power, and therefore the losses in the lines, increases. At the same time they have to pay a penalization if they consume re- power during peak load hours. The incentive or penalization is calculated as a percentage of a reference value that is updated The RD 661/2007 (article 29) established a reference value of 7.8441 c/kWh and a percentage (annex V) that goes from -(penalization) to +8% (incentive). Producers using renewable energy sources without storage capa- bilities such as wind power or solar will no longer receive capacity payment according to the RD 661/2007. Year 2006, the average capa- city payment for wind power producers, amounted to 4.81 c/kWh. Other producers included in the special regime can receive capacity payment but only when choosing the market option. , Table 1-2 shows the payment scheme defined by the RD 436/2004. As mentioned in Section 1.1.3, currently, most of the producers included in the special regime are regulated by the RD 436/2004. However, no later than year 2012 they have to change to the payment scheme defined by the new RD 661/2007, shown in Table 1-1. Table 1-2 Payment scheme for renewable electricity production according to RD 436/2004. The reference tariff, TRF, for year 2004 wasTPF16FPT 7.2072 c/kWh, for year 2005 it wasTPF17FPT 7.3300 c/kWh, and for year 2006 it was equalTPF18FPT to 7.6588 c/kWh. (for all groups in (for all groups 0.10* TRF) solar and b.8, the 0.40*TRF) (350 MW) (150 MW) 41.4414[2004] 42.1475[2005] 44.0381[2006] 33.1531[2004] 33.7180[2005] 35.2305[2006] 21.6216[2004] 18.0180[2004] 0.7207 [2004] 21.9900[2005] 18.3250[2005] 0.7330 [2005] 22.9764[2006] 19.1470[2006] 0.7659 [2006] 17.2973[2004] 14.4144[2004] 0.7207 [2004] 0.7330 [2005] 17.5920[2005] 14.6600[2005] 0.7659 [2006] 18.3811[2006] 15.3176[2006] (200 MW) 21.6216[2004] 18.0180[2004] 0.7207 [2004] 21.9900[2005] 18.3250[2005] 0.7330 [2005] 22.9764[2006] 0.7659 [2006] 17.2973[2004] 14.4144[2004] 0.7207 [2004] 17.5920[2005] 14.6600[2005] 0.7330 [2005] 18.3811[2006] 15.3176[2006] 0.7659 [2006] (13000 MW) 6.4865[2004] 2.8829 [2004] 0.7207 [2004] 6.5970[2005] 2.9320 [2005] 0.7330 [2005] 6.8929[2006] 3.0635 [2006] 0.7659 [2006] 5.7657[2004] 2.8829 [2004] 0.7207 [2004] 5.8640[2005] 2.9320 [2005] 0.7330 [2005] 6.1270[2006] 3.0635 [2006] 0.7659 [2006] 16TP PT RD 436/2004, disposicion adicional sexta. 17TP PT RD 2392/2004, article 2. 18TP PT 1556/2005, article 2. 6.4865[2004] 2.8829 [2004] 0.7207 [2004] 6.5970[2005] 2.9320 [2005] 0.7330 [2005] 6.8929[2006] 3.0635 [2006] 0.7659 [2006] 6.1261[2004] 2.8829 [2004] 0.7207 [2004] 6.2305[2005] 2.9320 [2005] 0.7330 [2005] 6.5100[2006] 3.0635 [2006] 0.7659 [2006] 5.7657[2004] 2.8829 [2004] 0.7207 [2004] 5.8640[2005] 2.9320 [2005] 0.7330 [2005] 6.1270[2006] 3.0635 [2006] 0.7659 [2006] 6.4865[2004] 2.8829 [2004] 0.7207 [2004] 6.5970[2005] 2.9320 [2005] 0.7330 [2005] 6.8929[2006] 3.0635 [2006] 0.7659 [2006] 5.7657[2004] 2.8829 [2004] 0.7207 [2004] 5.8640[2005] 2.9320 [2005] 0.7330 [2005] 6.1270[2006] 3.0635 [2006] 0.7659 [2006] 6.4865[2004] 2.8829 [2004] 0.7207 [2004] 6.5970[2005] 2.9320 [2005] 0.7330 [2005] 6.8929[2006] 3.0635 [2006] 0.7659 [2006] 6.1261[2004] 2.8829 [2004] 0.7207 [2004] 6.2305[2005] 2.9320 [2005] 0.7330 [2005] 6.5100[2006] 3.0635 [2006] 0.7659 [2006] 5.7657[2004] 2.8829 [2004] 0.7207 [2004] 5.8640[2005] 2.9320 [2005] 0.7330 [2005] 6.1270[2006] 3.0635 [2006] 0.7659 [2006] 6.4865[2004] 2.8829 [2004] 0.7207 [2004] 6.5970[2005] 2.9320 [2005] 0.7330 [2005] 6.8929[2006] 3.0635 [2006] 0.7659 [2006] 5.7657[2004] 2.8829 [2004] 0.7207 [2004] 5.8640[2005] 2.9320 [2005] 0.7330 [2005] 6.1270[2006] 3.0635 [2006] 0.7659 [2006] Hydro power P10 MW (2400 MW) (3200 MW) biomass from industrial installations in the agricultural and forestry sector 2.8829 [2004] 0.7207 [2004] 6.4865[2004] 2.9320 [2005] 0.7330 [2005] 6.5970[2005] 3.0635 [2006] 0.7659 [2006] 6.8929[2006] 5.7657[2004] 2.8829 [2004] 0.7207 [2004] 5.8640[2005] 2.9320 [2005] 0.7330 [2005] 6.1270[2006] 3.0635 [2006] 0.7659 [2006] 6.4865[2004] 2.8829 [2004] 0.7207 [2004] 6.5970[2005] 2.9320 [2005] 0.7330 [2005] 6.8929[2006] 3.0635 [2006] 0.7659 [2006] 5.7657[2004] 2.8829 [2004] 0.7207 [2004] 5.8640[2005] 2.9320 [2005] 0.7330 [2005] 6.1270[2006] 3.0635 [2006] 0.7659 [2006] 6.4865[2004] 2.8829 [2004] 0.7207 [2004] 6.5970[2005] 2.9320 [2005] 0.7330 [2005] 6.8929[2006] 3.0635 [2006] 0.7659 [2006] 5.7657[2004] 2.8829 [2004] 0.7207 [2004] 5.8640[2005] 2.9320 [2005] 0.7330 [2005] 6.1270[2006] 3.0635 [2006] 0.7659 [2006] 6.4865[2004] 2.8829 [2004] 0.7207 [2004] 6.5970[2005] 2.9320 [2005] 0.7330 [2005] 6.8929[2006] 3.0635 [2006] 0.7659 [2006] 5.7657[2004] 2.8829 [2004] 0.7207 [2004] 5.8640[2005] 2.9320 [2005] 0.7330 [2005] 6.1270[2006] 3.0635 [2006] 0.7659 [2006] 6.4865[2004] 2.8829 [2004] 0.7207 [2004] 6.5970[2005] 2.9320 [2005] 0.7330 [2005] 6.8929[2006] 3.0635 [2006] 0.7659 [2006] 5.7657[2004] 2.8829 [2004] 0.7207 [2004] 5.8640[2005] 2.9320 [2005] 0.7330 [2005] 6.1270[2006] 3.0635 [2006] 0.7659 [2006] 5.7657[2004] 2.1622 [2004] 0.7207 [2004] 5.8640[2005] 2.1990[2005] 0.7330 [2005] 6.1270[2006] 2.2976 [2006] 0.7659 [2006] Besides the feed-in tariffs, premiums and market incentives in Table 1-2, the RD 436/2004 establishes incentives/penalties for reactive power (annex 5) from incentive to -penalty, incen- tives for fault-ride-through of of the reference tariff (TRF) and capacity payment. The capacity payment applies only to those pro- ducers choosing the market option and year 2006 it amounted to 4.81 c/kWh. , Table 1-3 shows the payment scheme defined by the RD 2818/1998. There are currently very few producers regulated by the RD 2818/1998. Table 1-3 Payment scheme for renewable electricity production according to RD 2818/1998. P5kW (up to 50 MW) ((50-P)/40) Secondary** Biomass *All vegetables with a growing period no longer than one year. Those can be used directly or after a transformation procedure. **Residues of the transformation of primary biomass such as biogas and biofuels. Besides the feed-in tariffs or premiums specified in Table 1-3 pro- ducers regulated by the RD 2818/1998 receive/pay an incen- tive/penalty for reactive power (article 26). When the power factor is larger than 0.9 then the producer receives a complement and when it is lower than 0.9 the producer pays a penalty. The amount of the complement/penalty is established in the Royal Decree for tariffs each year. The feed-in tariffs and premiums defined in the RD 2818/1998 are updated yearly with the variation of the average wholesale electri- city price. 1.2.1Development of payment schemes By comparing the payment schemes in the last three royal decrees on the special regime the following conclusions can be drawn: Solar photovoltaic power production has experienced a great in- crease regarding payment. Installations with a capacity below 5 kW have almost the same payment as 10 years ago but large installations have got a much higher payment according to the new legislation. A solar photovoltaic installation with an installed capacity of 150 kW received according to the RD 2818/1998 a payment of 21.6 c/kWh and according to the new royal decree, RD 661/2007 a payment of 41.8 c/kWh is received. power producers choosing the feed-in tariff option receive slightly higher payment than 10 years ago but since 2004 the number of wind power producers choosing the market option has increased tremendously and during 2005 and 2006 they have received very high payments. However, the payment has been limited by the new legislation published on 2007 by a price cap of 8.5 c/kWh which is higher than the feed-in tariff wind power producers received 10 years ago. Electricity production from energy crops and biogas receive much higher payment according to the new legislation. An installation using energy crops with an installed capacity of 1.5 MW earlier received according to the RD 2818/1998 a payment of 6.5 c/kWh and according to the new legislation, RD 661/2007 will receive a payment of 15.9 c/kWh. 1.2.2Agents Opinions on different Payment Schemes for According to several interviewed agents in the Spanish wind power sector, payment schemes based on market mechanisms such as green certificates, need price setting mechanisms capable of reflecting real investment costs in order to work as effective payment schemes. This is only possible in a wide and deep market where the participa- ting agents have equal access to the price relevant information. The wind power sector is still emerging and, according to the interviewed, is still not prepared for a payment scheme based only on market mechanisms. However, this kind of market-based payment schemes can be adequate when the sector is more established. There is a risk with those market-based systems to end up paying more for the capacity than what it had been paid with a feed-in tariff system. An example mentioned by some of the interviewed agents in is what has happened in the UK and where the certificates have reached prices of 140–180 /MWh, which is much higher than the feed-in tariff paid to renewable producers in and of 80–85 /MWh. 1.3Application Procedure for Access and Connection to the The application procedure for the connection to the grid is defined in the Royal Decree 1955/2000 in its Title IV. There are two different procedures depending on whether the production installation is to be connected to the transmission system or to the distribution system. The procedures are outlined below. Procedure for connection to the transmission system (RD 1955/2000 article 53 and 57) 1.The project developer sends the access application to the trans- mission system operator, TSO. The application has to include the information defined in the operating procedure 12.1 published by the TSOTPF19FPT. 2.The TSO sends a report with the eventual anomalies or mistakes to the project developer so that those are corrected. 3.The project developer corrects the anomalies or mistakes within a month from the reception of the report of the TSO. 4.After receiving the correct access application, the TSO has two months to communicate the project developer on the access license depending on whether there is available capacity for the connection or not. If the TSO does not inform the project developer on time, then the project developer can appeal to the regulatory body CNE. If the project developer does not agree with the proposed connection point by the TSO then he can appeal to the CNE who has a period of three months to decide on the conflict. The TSO´s report on available capacity has a validity of six months. 19TP PT (only Spanish version available) 5.The project developer sends the basic project and the program of execution to the transmission company in order to get the con- nection license. 6.The transmission company has to send within a month a report to the TSOTPF20FPT regarding the fulfillment of the technical require- ments as well as a copy of the basic project and the program of execution. 7.The TSO will write a report within a month. 8.The access and connection licenses can be processed at the same time but to get the connection license the project developer has to have the access license. Project developers of installations which are to be connected to the transmission grid have to hand in a deposit of of the cost of the whole installation (for example of the cost of the wind farm) to the Ministry, MITYC according to the 1454/2005 which added a new article to the RD 1955/2000 (article 59 bis). That is a requisite to initiate the procedure for access and connection to the grid.