Is the wind energy sector in Spain over-subsidized? Study of the tariff deficit through a simulation of a wind farm

The increase in the cost of traditional sources of energy and the negative environmental effects they cause have made necessary to incentivize the use of renewable energies at the expense of creating a tariff deficit. In Spain, like in the rest of the developed world, Wind Energy is the renewable source of energy that has experienced the highest development. From 1990 on this technology has flourished. This development has been followed by a reduction of its costs as well as the creation of a strong and consistent industry. The Spanish Legislation did not foresee prices should adapt to technical advances and to its increased use. As a result, the tariff deficit has become a structural problem that required the intervention of the Spanish government to absorb a part of the costs which cannot be charged directly to the consumers. This paper analyzes the sector’s characteristics and it shows, through a wind farm simulation, that the industry of wind energy is oversubsidized. This excess in incentives is a possible cause of the current tariff deficit. The recommended solution is to decrease the incentives without seriously damaging the industry.