Spain to raise capacity payments for coal, gas generation

The Spanish government has submitted an order to energy regulator CNE to increase the amount power generators are paid to build and operate gas and coal fired plants, reports Platts.
The document outlines a proposed increase in incentives for construction of generating capacity as well as a capacity payment for combined cycle gas and coal plants to offer backup supply to the country's system, according to Platts, citing sources from CNE.
Spanish daily El Confidencial reported earlier this month that the draft ministerial order would allow for an increase in capacity payments of EUR230m ($333.2m), with the current payments increasing by 30 per cent, or EUR150m, and an additional EUR80m set aside for new build.
The majority of the payments will go to CCGT plants as well as coal plants, which have seen production decrease over the past two years due to the growing renewables sector, the report said.  The newspaper said the government's incentive for new build would be raised from an existing EUR20 000 to EUR26 000 per MW built.
A new capacity payment would be made for future and existing plants, totaling EUR3150 per MW for CCGTs and a potential maximum of EUR20 570 per MW for coal plants, the paper said, without adding further details.
A ministry official declined to confirm these figures, while the regulator's spokesman said he would not comment until the ministerial order had been discussed and approved.
Capacity payments compensate fossil fuel fired plants for providing backup power at times of either peak demand or low renewable output. If wind levels fall, CCGTs can be brought almost instantly into action to ensure continuity of generation within the national grid.
According to the regulator, CCGTs have fallen from providing an average 3618 hours of output between 2007 and 2009, to 2563 in 2010 and have only been running at 30-40 per cent of total capacity so far in 2011. Since 2007, Spain has aggressively expanded its renewable portfolio in wind and solar, largely incentivized by long-term feed-in tariffs.

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