Stable regulatory framework for wind power

The Chairman of Gamesa requests nimbleness in defining a stable regulatory framework for wind power, defending its role in driving competitiveness.

The Chairman of Gamesa, Jorge Calvet, urged the political parties to step up the pace of talks over the proposed bipartisan pact on energy strategy in order to nail down a stable and favourable regulatory environment for the wind power sector. “Otherwise, any delays in talks will throw us back into the state of uncertainty that has been hanging over the sector for more than a year, with significant ramifications for sector players and their positioning in the capital markets”.

Calvet advocated the need to define a long-term strategic energy plan, moving “beyond the debate of over premiums and ideology, paving the way for balanced participation by all available technologies and based on three principles: reduction of national energy vulnerability, diversification of energy sources and supply independence and security guarantees, with the added benefits of boosting the economy’s competitiveness, while minimising costs and the environmental fallout”. These remarks were made during a speech given today at the ‘Keys to being competitive on the international stage’ talks organised by business school ESADE and Deloitte.

The Chairman of Gamesa defended the thesis that wind power has been a reality for many years now and is currently a mature power technology in demand all over the world, having benefitted from orderly and predictable growth that has prevented the build-up of “a bubble while generating returns for the economy far in excess of the premiums received”. “Wind power” he stressed, “is the only technology in Spain that meets all the targets laid down in Spain’s 2005-2010 Renewable Energy Plan”. He also highlighted that fact that wind power “guarantees economic competitiveness and is one of the factors driving the reduction in pool prices by virtue of displacing more expensive fossil fuel power stations”.

Different from other renewable energy sources and not responsible for tariff deficit

He went on to note that “wind, like the other renewable energy sources, prevents the emission of CO_2, is a limitless resource and reduces nations’ energy dependence; however it is markedly different from the other renewable sources in the following two respects: (i) its industrial nature (meaning the existence of a national industry built around proprietary technology with longer development periods – eight years to develop a wind farm – and higher capex requirements) and (ii) technological maturity, with the sector firmly established on the learning curve, a factor driving price competitiveness”.

Calvet dismissed the idea that wind power is responsible for the tariff deficit in Spain. In 2009, wind power premium shortfalls amounted to €230 million, just 5% of the total tariff deficit.

Under prevailing regulations, wind power generation would receive €28 billion in premiums over the next 20 years. Generating the equivalent amount of energy using gas, assuming average IEA prices, would cost €50 billion (the cost of gas imports + the cost of purchasing carbon emission certificates). “Wind premiums”, he concluded, “represented 9.8% of total fixed electricity system costs whereas this wind power covered 13.4% of national demand”.

During his speech, Jorge Calvet referred to five factors which he considers will continue to drive growth in the wind power sector medium- and long-term: the global commitment to cutting carbon emissions, growing demand for energy worldwide, the role played by wind power in boosting energy independence, the anticipated increase in and volatility of fossil fuel prices and the steadily increasing competitiveness of wind power as a competing technology.

Shift in demand, more competition and more innovation

Gamesa’s Chairman also outlined some of the challenges facing the sector medium term. “Together with the need for a stable and favourable regulatory environment, we sector players need to respond to the gradual shift in demand towards growth markets, primarily the US and China. This circumstance, combined with the inexistence of a stable framework in Spain”, he added, “could trigger offshoring among companies with a truly international calling”.

Calvet believes that the new wind industry faces significant changes in demand which is becoming more exacting, the need to remain at the cutting edge in terms of innovation and technology and growing competition from the traditional players as well as industrial newcomers, particularly in the low cost segment.

Against this backdrop, innovation and technology constitute both a challenge and an opportunity: “the key lies with being flexible, staying ahead of the curve and being able to develop the best and most affordable technology for all kinds of markets and wind conditions”. Another key sector driver medium-term is the need to work on efficient storage formulae and pan-European interconnection solutions.

Source: Gamesa