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The Spanish government decided last month to slap a ceiling on the amount of power which can be bought at a premium price from independent producers. A growing surplus of electricity on the already saturated grid lies behind the decision, along with fears that the increasing amount of independent power being bought at premium prices would increase the size of electricity bills to unpalatable proportions.

The main target of the Royal Decree, approved by the Council of Ministers on December 9, is cogeneration, but renewable energy systems, including wind power, are also affected. The decree comes into effect in early 1995 and limits the installed capacity of individual power installations to 100 MW. Beyond that the power generated will not be paid at the premium rate of ESP 11/kWh. Over the 100 MW ceiling, companies will be paid the general tariff of approximately ESP 7/kWh. Cogeneration, the hardest hit, will also suffer cutbacks in revenue. According to officials, a growing number of industrial companies with cogeneration systems installed had taken advantage of the previous legislation, ploughing a huge percentage of their excess output into the grid for immense profit. Purchase of this surplus power, guaranteed by law because of its environmental credentials, was threatening to force an overall increase in electricity prices in Spain.

Over the past year, some 1000 MW of power has come on line from renewable, alternative and cogeneration systems -- and utilities have reacted angrily to what they called "discrimination." Spain boasts a "power mountain" and with the economic recession demand has fallen in recent years.

Although the 100 MW ceiling also applies to wind, the Royal Decree, which comes hand-in-hand with the new electricity law, will respect current incentives and plans for further development. But developers must keep projects to under 100 MW of installed capacity if they wish to receive a premium price for all the power generated. "But no way does this mean that wind power or other alternative power systems will suffer as a result," says Francisco Serrano, the director of the Institute for the Diversification and Saving of Energy (IDAE). "The policy is to maintain the current price paid for wind power and this is likely to increase slightly once the new law is implemented."

The law is also careful to ensure that profit from cogeneration remains high enough to encourage companies to still consider it. The cogeneration incentives were awarded a warm welcome by environmentalists when first introduced.