Energy reform has been an absolute tsunami, which has left wind power sector gasping for survival. Now, after months of regulatory struggle, it’s time to consider what the future of the sector will be. That was precisely the subject of the day’s session held by the Spanish Wind Power Business Association (AEE) on July 2nd in Madrid, as well as the energy reform. The techno-economic, financial and legal experts there were adamant: the wind power sector will have to work hard to adapt its modus operandi to a regulation that condemns them to a scenario with very low income.
As could not be otherwise, the big question that haunted the room was how to minimize the impact of the reform on income. And, on that point, whether or not it makes sense to continue bidding in the market at zero, when it is very possible that the monetary compensation received will be less than the variable costs. Experts believe this to be the case, as it no longer seems to make sense to make offers that do not take variable costs into account. The predictable result is that the electricity market price will rise as there will not be so much supply at zero, which will inevitably affect the final price paid by the consumer.
If the model up till now has invited wind farms to bid at zero to sell all possible production, the lack of incentives encourages them to manage production at an optimal level, and even in some cases dump the wind (a contradiction, given its zero cost) if it costs money to produce. An added problem is to calculate the variable cost of maintenance, which involves tightening up on O & M contracts. And specific models must be created to make those decisions.
Article published in: FuturENERGY July-August 2014