Is wind energy really affordable?

Should the case of Spain cause worries?

Two recent decisions by the Spanish government regarding wind energy have highlighted concerns about the affordability of this sector.

The first decision was to create a special fund for the €10 billion government deficit originating from wind energy incentives. The second decision was to end the complete autonomy of the regions in licensing wind projects. These decisions were taken to avoid exceeding the target capacity of 20,155 MW under the government incentives currently in force. Via agreements with the regions, the wind industry was already projecting 41,000 MW. Such a figure would be unaffordable for the government if the current regimen of incentives is left in place. The new national registration of wind projects will also force wind developers to give priority to the most profitable wind sites nationwide, instead of considering projects only on a regional basis.

The Spanish government’s measures provoked a lively discussion on Power Globe and other Internet forums. Can Spain still be regarded as a textbook example of renewable energy promotion, or is the country on the edge of a bankruptcy due to excessive investments in wind?

Conflicting conclusions

As expected, the wind sceptics believe the latter. They see this news as a signal that wind energy development has brought Spain nothing more than financial disillusionment. Wind energy is regarded as excessively expensive compared to nuclear or coal energy. Some commentators on the forums also point to the loss of jobs that will inevitably occur with the reduction of government incentives. This argument is used to prove that jobs in the renewable energy industry are volatile.

Other commentators, on the other hand, point out that these conclusions are drawn from an incomplete view of reality. They argue that wind energy is in fact very much affordable and that Spain is nowhere near the edge of going bankrupt — and certainly not because of its investments in renewable energy. The following arguments speak in favour of government incentives such as the ones currently in force in Spain:

1) The cost of wind energy is not excessive. Although it is still higher than that of conventional energy, it is not many times higher. Government incentives are the ideal tool to fill the gap for a limited period of time. Apart from that, there are large regional differences in the cost of wind energy. It is therefore completely rational that the Spanish government now decided to stimulate wind energy investments only where it is the most efficient.

2) The money is not lost. The government incentives for the wind industry are an investment in the future. This €10 billion is not necessarily lost. As the market grows, wind energy gets cheaper (about 20% cheaper for each doubling of the capacity). If it becomes cheaper than any other type of energy, an extensive wind park will certainly give a boost to the economy.

3) The renewable economy is a trump card. Those European countries that were the first to stimulate wind energy — Denmark, Spain, and Germany — now dominate the wind industry and export their technology globally. These government incentives did not, in fact, create a completely dependent (and thus fragile) local industry, but rather a world leading industry that is currently supplying the wind energy boom in the US.