Oil makes wind power competitive: Spanish utilities

By Martin Roberts

MADRID (Reuters) - Soaring oil prices have made wind power more competitive but Spanish government subsidies will be needed for some time to allow the industry to meet ambitious growth plans, generators said on Monday.

Spain has about 16,000 megawatts of installed wind power capacity, making it the world's third-largest producer, after Germany and the United States.

Spanish government plans call for that capacity to expand to 20,000 MW by 2010, and the industry is eyeing 40,000 MW by 2020, in order to comply with European Union objectives to obtain 20 percent of all energy from renewable sources.

Xabier Viteri, chairman of the renewables (IBR.MC) arm of Spain's biggest utility, Iberdrola (IBE.MC), said the industry would need the government to maintain so-called "feed-in tariffs" in the medium term.

"We face a market of gigantic dimensions, so all players will have to meet an unprecedented challenge to boost competitiveness," Viteri told a wind power convention.

Viterbi said the cost of electricity generated by wind turbines was 80-85 euros ($126.4-134.3) per megawatt-hour, compared to 80 euros/MWh for gas-powered generators and 85 euros/MWh for oil-fired turbines.

Wholesale power prices in Spain's deregulated market, where just 25 percent of electricity may be traded, stand at around 55 euros/MWh for prompt delivery, and 65 euros/MWh for delivery in 2009.

Fernando Ferrando, general director of renewables at utility Endesa (ELE.MC), estimated premiums paid to Spanish wind power producers in the year to May were 24 euros/MWh.