POWER May 2016 - 8

Spain's Power System
Slashes Debt in 2015
Spain's power sector, which has been
shaken financially in recent years owing
to plunging power demand, posted its first
electricity tariff surplus in 14 years at the
end of 2015. The National Markets and
Competition Commission said on March 7
that the surplus of €550 million put the
country's debt at about €25 billion at the
end of 2015-a 7% decrease from a year
earlier.
Spain's government has been operating
the power system at a loss since 2000. The
deficit expanded beginning in 2008 due
to regulated costs-or so-called " access
costs. " These include grid costs, subsidies
for renewables and co-generation, and
compensation for higher electricity costs
on Spain's islands. The government's reluctance
to increase fees paid by power customers
to match subsidies for renewables
led to a massive investment in the thenfledgling
renewables sector, but it also
caused an explosion in costs from €1.2 billion
in 2005 to €8.4 billion in 2012.
The country's five main vertically integrated
energy utilities bore the financial
burden until Spain's Supreme Court
ruled that those companies were entitled
as creditors to recover costs imposed on
them by regulation. In 2010, to avoid a
huge one-off compensation-which would
have dealt a major blow to Spain's already
teetering finances-the country set up
the Spanish Electricity Deficit Amortisation
Fund to turn the utilities' rights into
fixed-income securities.
Meanwhile, to lower the deficit, Spain
has suspended support to almost all new
renewable energy installations since early
2012, added new taxes on power generation
since 2013, and limited increases in
access fees. Also in 2013, it embarked on
a more radical electricity reform, revising
feed-in-tariffs with a plan that guarantees
a yearly rate of return for investors.
While power prices in Spain have soared
by more than 60% over the last few years,
the country is on track to cut cumulative
electricity tariff debt to below 100% of
regulated revenues by 2019, as Antonio
Tena, an executive with rating agency
Moody's Investors Service, observed in
March. " The current legal framework
strongly protects the commitment to reach
electricity system sustainability. Ongoing
surpluses would significantly contribute
to the system's deleveraging. Legal reforms
are starting to yield results in taming
electricity tariff deficits, " he said.
The renewables sector is also thriving.
This January, investors purchased 500 MW
of wind power and 200 MW of biomass
power at auction without financial support.
Spanish wind turbine maker Gamesa
has reported a jump in sales, and ACCIONA
posted a net profit increase of 12.1%
in 2015 compared to the year before.
Iberdrola, one of Europe's largest power
1. No smoke, all mirrors. Despite financial troubles, Spanish renewables firm Abengoa
started commercial operation of Africa's first solar tower this February. The 50-MW Khi Solar
One plant installed in South Africa uses first-of-its-kind " super-heated " tower technology, which
enables production at maximum capacity for two hours without sun. It also has a unique dry
cooling system. Courtesy: Abengoa
companies, also saw a modest 5% surge in
underlying earnings for 2015.
But the volte-face on energy policy
has been anything but a boon for some
of Spain's other power companies. Earlier
this year, Spanish engineering and renewable
giant Abengoa SA reported a €1.2 billion
loss for 2015, after posting a €125.3
million profit a year earlier. In March, it
signed a debt-restructuring agreement
to avoid becoming Spain's biggest-ever
corporate bankruptcy, though it was still
forced to file for protection in the U.S.
under chapter 15, which governs crossborder
insolvencies. The company, which
has 250 projects across 50 countries (Figure
1), has been saddled with debt from
a rapid global expansion. For now, the
Seville-based company doesn't expect the
deal to materially affect operations in the
U.S., where it holds stakes in the federally
backed Solana and Mojave solar thermal
plants.
-Sonal Patel, associate editor
German Companies Hope
to Take Energiewende to
Iran
Taking full advantage of the international
political thaw with Iran, Germany has begun
working closely with the fossil fuel-
rich nation to develop renewable energy
strategies based on the successes and failures
its policymakers have learned from its
own Energiewende (energy transition).
To jumpstart this, Germany's government
recently released a commissioned
report titled " Enabling PV Iran, " which
discusses opportunities offered by the Iranian
photovoltaic (PV) market. Funded by
the German Foreign Office and written by
the German Solar Association (BSW-Solar)
in cooperation with the consulting firm
Eclareon, the Iran-Wind Group, and Pflüger
International, the 135-page study aims to
establish long-term cooperation with solar
companies and industry associations
in Iran. The preliminary results were presented
in Tehran in December, and the full
report was released this March.
Though this is just the latest chapter in
Germany's increasing use of energy policy
as a form of soft diplomacy, Germany is
also taking advantage of its status as Iran's
largest European trading partner to ensure
a prime spot in the race to harness the
Middle Eastern nation's renewable potential
as its fossil fuel reserves diminish and
8
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