Spain's government passes decree on 2012 power capacity payments

Madrid (Platts)--21Nov2011/754 am EST/1254 GMT

The Industry Ministry of Spain's outgoing government has approved a scheme for capacity payments to reward generation by hydro, coal, gas and fuel oil.

Under the scheme, capacity payments ranging between Eur1,220/MW ($1,649) and Eur4,640/MW will be paid for a full year to plants which remain on standby to cover peaks of demand or troughs in national wind generation.

The scheme, which was published Friday in the country's official state gazette, which will come into operation on December 15 will pay according to a formula.

The first variable will be a set rate, which will be Eur5,150/MWh for the remainder of 2011 and 2012. This will be multiplied by a co-efficient related to the nature of generation.

This will be a factor of 0.912 for coal-fired plants, 0.913 for combined cycle gas turbines, 0.877 for fuel-oil and 0.237 for hydro, including pumping, the ministerial decree said. The outcome will then applied on a per megawatt basis.

To qualify, the plants have to be available for 90% of the time in the two peak time bands. The operators have been given two weeks in which to notify the ministry of the plants that will be entered into the scheme. For future years, the interested parties have to present the ministry a list in the September prior to the year in which they hope to receive the payments, the decree said.

Utilities analyst at JP Morgan Javier Garrido said the total cost will be around Eur150 million a year, while the incentives for new build will be worth Eur195 million a year.

--Luca Baratti, newdesk@platts.com

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