Madrid, 22 July (Argus) — The Spanish government is preparing plans to offer incentives for the closure of renewable and combined heat and power (CHP) plants unable to cover their operating costs under the country's new subsidy scheme, according to a draft bill being studied by energy sector regulator CNE.
CNE is expected to publish its report on the bill by the end of this month. If the industry ministry and cabinet approve the recommendations, the bill will pass into law.
The proposal would offer incentives to renewables and CHP plants previously grouped in the "Special Regime", which comprises over 39GW of installed generation capacity, equal to nearly 40pc of the country's total. These plants accounted for 46pc of net generation in the first half of this year.
The draft bill proposes that the government would incentivise a given plant to close if it meets three conditions. Firstly, subsidies paid to the plant must exceed its income from selling power. Second, the closure must not affect supply. Third, the closure must not affect broader energy targets, such as the EU 20-20-20 plan, which requires member states to source 20pc of their energy from renewables by 2020.
Many renewable plants and CHP units are likely to meet the conditions to apply for incentivised closure, under the current guidelines. Subsidy payments to the Special Regime outstripped government estimates earlier this year, owing in large part to unseasonably high wind generation in the first quarter, which weighed heavily on day-ahead pool prices. In addition, Spain has an overcapacity of power plants and the country is already ahead of the EU 20-20-20 goal, in terms of its electricity sector.
Spain's power sector reform presented at the end of financial week 28 scrapped the subsidy scheme for renewables and CHP plants previously known as the Special Regime and introduced a new payment system based on a plant's investment costs and the performance of Spanish state debt, which the government estimates will provide an annual pre-tax return on investments of 7.5pc.
Renewable and CHP energy generators have said real returns are likely to be much lower, which could lead companies to bankruptcy if they default on private-sector loans used to build their plants.
Spanish generation mix, % |
||||||
|
2009 |
2010 |
2011 |
2012 |
1H13 |
|
Ordinary Regime |
77 |
71 |
68 |
66 |
63 |
55 |
Special Regime |
23 |
29 |
32 |
34 |
37 |
45 |
Wind |
11 |
13 |
16 |
16 |
18 |
24 |
CHP and other non-renewables |
8 |
10 |
10 |
11 |
11 |
11 |
Solar PV and thermal |
1 |
3 |
3 |
4 |
5 |
5 |
Others - Biomass, small hydro, etc |
4 |
3 |
4 |
3 |
3 |
5 |
—Red Electrica de Espana (REE) |
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