Spain Renewables Report Q4 2012

Includes 3 FREE quarterly updates

BMI View: A worsening economic outlook and a sharp reversal in government support for renewables has led us to revise down our short- and long-term forecast for the non-hydropower renewable energy sector in Spain. We believe that the full effect of the FiT suspension will be seen in 2013 and 2014, having witnessed the cancellation of several renewable projects due for completion after 2012. We have also noticed that more Spanish renewable energy developers are seeking growth in foreign markets. We forecast non-hydropower renewable generation to grow by 5.2% in Spain in 2012. This is a significant downward revision from our previous forecast of 7.6%, as the country’s economic outlook continues to worsen, and the government cuts support for renewables. One of the most drastic moves taken by the government was a temporary suspension of feed-in tariffs (FiTs) for new renewable energy installations in January 2012.

Over the long term, we forecast non-hydropower renewable generation to grow an average of 3.9% per annum between 2012 and 2021. We believe that the indefinite suspension of FiTs for renewables will greatly affect growth of the sector in 2013 and 2014, as a large number of projects are cancelled or frozen. For instance, wind energy developers Eolia and Fersa announced that they have frozen nine wind projects with a total of 257MW in Spain as they are unable to commission the plants by this year. Our Country Risks team has also revised down the country’s medium-term growth forecast on expectations of a eurozone sovereign bailout, and we expect electricity consumption in the country to stagnate accordingly. Here are the key trends and regulatory changes in the industry:

• The government suspended FiTs for all renewable energy installations indefinitely in January 2012. This will have a material impact on the sector in 2013 and 2014.
• In May 2012, FCC began construction of a 50MW solar thermal power plant in Villena, a project that carries a price tag of EUR240mn, while S.A.G Solarstrom and Valsolar announced plans to construct a 400MW solar PV power plant in Calzadilla de los Barros, with work expected to start in 2014. We note that the 400MW plant might be cancelled, as the FiT suspension could leave the project economically infeasible.
• In August 2012, Spain’s EDP Renewables and Repsol Nuevas Energias announced plans to build a 1.5GW offshore wind farm in Scotland. This reflects a growing trend among Spanish renewable energy developers to move overseas.