Lessons in RE Development From Navarre, Spain

Why are so many renewable energy projects not able to get off the ground, despite strong popular support for them? — Phil Mekelburg, Atlanta, Georgia

Phil, that’s a great question, and one that many energy developers wish they had an answer to. We certainly hear a great deal about the need for more renewable energy in this country. Political candidates don’t stop talking about their plans, and one consumer survey after another confirms strong public backing for decreasing our reliance on fossil fuels and developing more home-grown green energy. Yet at the same time we also hear of many proposed green energy projects not making it past the proposal phase. This is in sharp contrast to the experience in Europe, where the rollout of renewables has been much more aggressive and successful. Why the difference?

It’s tempting to ascribe it to a difference in the relative economic environment for these projects, and leave it at that. European nations have higher energy prices, and several (notably Germany, Spain, Denmark and others) have put in place generous incentive programs for the implementation of renewable energy.

Much has been written about incentive programs for renewables, so I won’t write more about that here. But it’s clear that economics can’t be the whole story. Many projects here in the U.S. have begun moving forward—with backing from equity and debt investors, and long-term power purchase agreements in place—only to be stopped due to other issues. So what else is going on?

Social, public and other factors often get short shrift. They’re not “hard” topics: you can’t run them through a financial model or put them on a legislative agenda. But as numerous projects have gotten stalled due to NIMBYism (“Not In My Backyard”), we’ve learned the hard way that they are no less important to getting a project done. When you compare different approaches taken to human, social and public issues, the difference in outcomes is striking.

As a case study of a successful approach, let’s take a look at what Spain has been able to accomplish. Spain has tackled its development of renewable energy sources aggressively. With 11,615 megawatts (MW) of installed wind capacity at the end of last year, Spain is second in the world to Germany in capacity (and about on par with the United States). The 23,372,000 MWh generated in 2006 provided just over 8.5% of Spain’s electricity: only Denmark boasts a higher percentage.

A disproportionate amount of this growth in renewables has come from Spain’s tiny Navarre region. Navarre’s installed wind capacity is about 950 MW—8.5% of the country’s electricity total on 2% of its land, and nearly two-thirds that of its neighbor, France. Located in the northeast of the country, between the Basque country and the French border, Navarre generates about 70% of its electricity from renewable sources — the vast majority from wind. How did this tiny region accomplish so much?

When reviewing the approach that Navarre has taken, and the differences with other regions and countries, what becomes striking is Navarre’s integrated end-to-end program for including varying constituencies, giving each a voice in the process and airing concerns early on. The regional government worked closely with the all the stakeholders to assure project buy-in, including residents, businesses and environmental groups. By being involved in the process, the residents in the Navarre Region have realized that the environmental and socio-economic benefits of wind energy outweigh any disadvantages of this source of power.

This open, cooperative process has made private developers more comfortable in making considerable investments at a time when the costs and the state of the technology have some early-stage risks. Environmental groups have been involved early on, with environmental impact studies conducted prior to project development.

Local governments have also been involved in the planning process. Navarre is a highly industrialized region, and support for new wind energy developments was seen to provide not only environmental benefits but also economic benefits through new employment and general economic development. Once behind the process, the local governments have been able to streamline the various administrative procedures, including planning and environmental impact assessments.

Completing the inclusive nature of the program, there was established a public–private company, tasked with developing the region’s renewable energy resources, whose shareholders include the government, the regional electricity supply company, local industry and the regional bank.

In addition, information, education and training are also important components of the program. There are ongoing campaigns both by renewable energy developers and by the municipalities to provide information to the general public about the benefits of renewable energy and the status of the region’s energy plan, to ensure continued public awareness and support.

The upshot of all this is that the environment has become one of cooperation, with the various constituencies working to find solutions to meet their renewable energy goals.  Contrast this with the tribulations of Cape Wind. Despite strong public support for the proposed 420 MW offshore wind farm (a 2007 public opinion survey found that 84% of Massachusetts residents—including 58% of those who live on the Cape and on the Islands—explicitly support the wind farm) the project has been stalled by opposition from local residents and environmental groups.

If we are to make good on our desire for more renewable energy, we are going to have to figure out how to put in place the structures and processes to allow all stakeholders to be involved and raise concerns. Does this create a lengthy, involved process? Yes, perhaps it does. But as projects like Cape Wind have demonstrated, these issues and constituencies are there anyway; better to confront them early in the process rather than waiting for positions to harden later on.

Implementation of a Navarre-type program will take work, no question. Implementing a renewable energy future will require adoption of new technologies, but if history is any guide, that’s the easy part. The hard part will be changing our collective mindset to cope with the changing circumstances.

Navarre was able to change the usual way of doing things in order to implement new power generation technology. Can we do the same?

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Al has held a number of leadership positions in the renewable energy and finance fields, and most recently was COO and EVP of Environmental Power Corporation/Microgy, a publicly-traded developer of commercial-scale biogas facilities. Previously Al worked for many years in the capital raising and M&A fields, having acted as a merchant banker, investment banker and corporate lawyer. Al has his JD and MBA degrees from Columbia University, and his undergraduate degree from Cornell University.

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