A new charge on wind farms and other non-polluting power plants in Spain to ‘compensate’ for higher revenue the government says the projects are earning from increased wholesale electricity prices undermines the EU Green Deal, according to WindEurope.
The Spanish government argues that high gas prices have driven up electricity prices and so because wind farms don’t have to buy gas they are earning ‘windfall profits’.
WindEurope said the government’s argument assumes that wind farms sell electricity at today’s so-called spot prices in the wholesale electricity market, but in reality they don’t.
A lot of what they sell is sold at pre-agreed prices in fixed-term contracts, the trade body said.
Wind farms and power utilities more broadly hedge against low and high prices and forego the upside if high spot prices, it added.
The new measure imposes charges of €40-80 a megawatt-hour, meaning a wind farm with fixed long-term revenues of €35/MWh will now lose money on every MWh it produces, WindEurope said.
As a result many wind farms will close down for the time being, it said.
WindEurope also noted that companies thinking of investing in new wind farms in Spain will now face lower revenues and increased uncertainty about future revenues given the government’s willingness to intervene in the market.
Therefore, the measure also undermines the outlook for new investments in wind and other renewables in Spain.
The two impacts directly undermine the EU Green Deal, which requires 30GW of new wind farms to be built every year to 2030.
State intervention of this nature goes against the principle of predictability and the informal legal framework that is central to EU energy markets, WindEurope said.