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RWE exits Spanish biomass as Ence sees costs rise

August 20 2012, Perpignan, FR — The two largest investors in Spanish biomass power are either delaying or axing projects, striking a blow to the nation's 2020 targets. Germany's RWE Innogy is exiting the country altogether and Spain's Ence is being forced to rethink a series of units, as facilities in the pipeline face rising costs and delays.


August 20, 2012
By Argus Media

RWE Innogy is pulling out of the Spanish biomass power market, abandoning nine planned projects that would have provided a cumulative 114MW of capacity. The company would have constructed the biggest number of individual projects in Spain from a single company. But it has taken flight because of the uncertainty created by the axing of feed-in tariffs, cut on 27 January by Spain's newly elected rightist government. That state decree shut off feed-in tariffs for all units not pre-approved in the state register for renewable projects. The 114MW that the firm had earmarked for installation would have provided 8.4pc of Spain's 2020 target for biomass power.

“The Spanish government published at the beginning of this year a moratorium on renewable energies, which radically reduced the support mechanism for biomass. So RWE Innogy pulled out of its biomass development projects in Spain,” a spokesperson for RWE confirmed to Argus.

Ence's plans to construct 210MW of new capacity by the end of 2015 for a total construction cost of €575mn ($710mn) look increasingly fraught. In announcing successful project financing for a new plant Ence admits its costs are rising and other plants are likely to face delays. It secured a €60.7mn credit package from Spanish banks La Caixa and BBVA for a 20MW, 180,000 t/yr biomass powered electricity plant in Merida. But the final bill for the facility will hit €80.9mn — with Ence providing the balance in cash — up from €50mn previously stated. Original cost estimates priced the unit at €26.2mn and the plant will not come on line until the third quarter of 2014, a year later than planned.

One unit on schedule is Ence's 50MW Huelva facility which will start commissioning this autumn, commencing full operations in the fourth quarter of 2012. The plant will be Spain's biggest and most costly at €125mn, but Ence admits only Huelva and Merida of its planned projects were pre-registered with the ministry of energy to receive feed-in tariffs. This leaves another 96.5MW of Ence's capacity additions in limbo, around 7.2pc of Spain's 2020 targets. The company has approval to build plants at Villaturiel (20MW), Badajoz (20MW), Alcantara (20MW), Burgos Melgar (20MW) and Ciudad Real (16.5MW). But the success of Ence's installation targets remains pivotal to Spain achieving its modest goals for biomass energy. Poor capacity growth rates saw the previous Spanish government cut the sector's 2020 targets from 2GW to 1.35GW, with only around 600MW currently installed.

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