Regulatory and policy options to encourage development of ...

SUSTAINABLE ENERGY REGULATION AND POLICYMAKING TRAINING MANUALpage 9.68reduced to 80 per cent, with obvious economic implications for investors. Thenew law will fix payments at 90 per cent of the AET for the first five years of plantoperation, dropping to 85 per cent for the next ten years and then 80 per centfor the remainder of the plant’s life. This new set-up is intended to stabilize securityof investment in new projects.A third option allowing generators to stick with the old arrangements will alsobe open to generators until 2007.It is likely that the market option will allow companies more revenue, though withfewer guarantees than are available with the fixed price option due to the riskthat the generator may not be able to sell its electricity. The mixture of mechanismsin this way allows generators to choose the support that best suits theirproject, as well as allowing the Spanish Government to incentivize companiestowards acting competitively and removing the prioritization of the electricity fromrenewable sources and thus reducing the level of interference that they offer tofree market trading of electricity generally. Effectively, having the choice will allowgenerators to take into account their own need for security of revenue againstthe potential for greater revenue at greater risk. It is likely that generators willhave the opportunity to switch between options on an annual basis.The viability of the market scheme will depend on how capable the generatorsprove to be within the market, as well as on the particular conditions applicablewithin the market relating to the ability of the wind generators to effectivelydeliver power to a schedule, and the penalties that apply for failure to do so.What these conditions will be are not yet clear.3. CONCLUSIONUsing a feed-in scheme plus some other support systems, Spain has been successfulin increasing its wind energy utilization. The changes announced in 2004will bring in a hybrid support scheme that offers a middle way between feedin/tariffschemes and obligation/certificate schemes, that is likely to be of interestto many other countries looking to balance the costs and benefits of eachtype of support mechanism.