SPANISH RENEWABLE ENERGY DELEGATION ENERGIZED BY

UNCLAS MADRID 000315 SIPDIS SIPDIS STATE FOR EUR/WE, EUR/PGI, EEB/ESC/IEC, OES/EGC, OES/ENV, OES/OGC, OES/PCI, OES/PD, G:E WEIGOLD DOE FOR PIA:BALLOU, EERE:KARSNER, MIZROCH, DICKERSON, CHIANG, OWEN COMMERCE FOR MAC:BOHIGIAN, CULVER, 3133/ITA/USFCS/OIO/EUR, 4211/ITA/MAC/EUR, 6110/ITA,MAS/ENERGY PASS PRESIDENT'S COUNCIL ON ENVIRONMENTAL QUALITY E.O. 12958: N/A TAGS: EINV ENRG KGHG SENV SP SUBJECT: SPANISH RENEWABLE ENERGY DELEGATION ENERGIZED BY MISSION TO U.S. REF: 07 MADRID 1823 SUMMARY -------------- ¶1. (U) Post and the Spanish government organized a highly successful renewable energy mission of Spanish companies and GOS officials to Washington and Denver February 11-14. In Washington, the delegation, which was led by Ambassador Aguirre and the Spanish Secretary of State for Tourism and Commerce, met with key federal policymakers and Senators as well as state government representatives and business groups. In Colorado, the delegation visited the National Renewable Energy Laboratory (NREL),met with the Governor of Colorado and Mayor of Denver, and met with local business leaders and renewable energy companies. ¶2. (U) The Spanish participants were very pleased with the mission, as was Post. Most of the 11 companies represented were considering major investments in the U.S., and many already have investments in the U.S. The Washington meetings provided an understanding of U.S. policy and the political environment on renewable energy. The NREL visit gave the government and business representatives an overview of cutting-edge U.S. research, and several of the companies were pleased by the meetings set up for them by the Commerce Department with U.S. companies. In planning the mission, Post arranged meetings that emphasized the policy links between renewable energy and addressing climate change. The mission showed the wide range of USG agencies with interests in renewable energy. State, DOE, and Commerce all played key roles in organizing it, and the delegation met with officials from Commerce, State, the CEQ, DOE, and the Senate, in addition to state and local officials. ¶3. (U) During the mission and in our followup meetings, the Spanish companies emphasized renewal of federal investment and production tax credits as the most important issue affecting their investment plans. The Washington meetings gave them a better understanding of the political context of these credits and an opportunity to explain to USG officials and Senators the importance of the issue to their investment plans. Our next steps include facilitating ongoing cooperation, building on recent public outreach opportunities, encouraging a U.S. renewable energy mission to visit Spain, incorporating renewable energy into key Post events, and exploring ideas for further cooperation and investment. Reports of the individual meetings start with para 9. End Summary. Why - Renewable Energy in the Bilateral Relationship -------------- -------------- ¶4. (U) Renewable energy is an increasingly important part of the bilateral relationship. Spanish companies, including the world,s largest and third largest producers of wind-generated electricity, own wind farms in at least 13 U.S. states and turbine manufacturing plants in two states. Spanish companies have significant solar and biofuels investments in the U.S. as well. One Spanish company has a DOE grant worth almost $80 million toward its construction of a biofuels plant. DOE cooperates with Spanish officials and Spanish companies on many projects. Post receives a steady stream of official visitors seeking to learn how Spain has developed a wind industry that provides ten percent of its electricity and a rapidly growing solar industry. Renewable energy also will play an important role in the Spanish and American responses to climate change. Who - Mission Participants -------------- ¶5. (U) U.S. Ambassador Aguirre co-led the mission and was accompanied by ESTOff. The Spanish delegation was led by Secretary of State for Tourism and Commerce Pedro Mejia. SIPDIS Secretary General for Energy Ignasi Nieto and Environment SIPDIS Ministry Director General for Climate Change Teresa Ribera (Washington only) also participated, along with five GOS staffers, Spanish Ambassador Westendorp, and three of Spain,s commercial counselors in the U.S. The private sector participants included representatives from eleven Spanish companies (three of whom were CEOs),the head of the Spanish renewable energy producers association, and the President of the American Chamber of Commerce. Representatives of some Spanish companies, U.S. subsidiaries and of separate U.S. companies owned by Spanish companies also participated in some of the meetings. Several delegation members commented that the Ambassador,s participation was a sign of the importance the Embassy and the USG placed on renewables. Results - Achieving Mission Objectives -------------- ¶6. (U) The mission was a key component of Post,s strategy (reftel) for closer cooperation on renewables issues. It emphasized the strategy,s three objectives of: 1) encouraging private sector investment in renewables; 2) encouraging generation of renewable energy; and 3) encouraging research and development. It also featured increased cooperation between government and businesses in both countries on renewables issues and helped strengthen renewables as a pillar of the bilateral economic relationship. ¶7. (U) By participating in substantive meetings with the delegation, the various federal and state government agencies and officials significantly advanced our collaboration on renewable energy by: -- Demonstrating government support for development of renewable energy, including investment and production tax credits, R&D, and federal-state actions. -- Reinforcing the USG's commitment to addressing climate change and the important role of renewable energy in doing so. -- Increasing linkages and closer cooperation, including an offer by NREL to analyze the implications of changes to feed-in tariff pricing, cooperation on R&D with NREL, bilateral meetings with various agencies, and participation in WIREC 2008. -- Promoting investment in the U.S. through the DOC's U.S. Export Assistance Center in Denver's work in arranging meetings between Spanish companies and U.S. companies in Colorado, and through meetings with state government representatives from California, Minnesota and Pennsylvania. -- Developing support for a U.S. renewable energy mission to Spain later in the year. What Now - Next Steps -------------- ¶8. (U) Post plans to build on the excitement created by the mission, and actively pursue opportunities to continue expanding our cooperation with the Spanish. We have followed up with Spanish private sector participants to get feedback on the mission, learn more about each company's investment plans for the U.S., offer future assistance, and solicit ideas for future collaboration. We will also work with the GOS officials and NREL to encourage R&D cooperation. Post will continue to conduct public outreach on renewable energy and its role in combating climate change. We will help the American Chamber of Commerce to plan a Spanish renewable mission to Texas in May in conjunction with the annual meeting of the U.S.-Spain Council, which also will feature renewable energy issues. We also will work with the GOS and private sector to encourage and plan a U.S. renewable energy mission to Spain. Finally, Post will support participation by USG officials in the American Chamber's second annual European Energy Roundtable event in Madrid in September. Reports on individual meetings follow: U.S. Department of Commerce -------------- Steven Jacobs, Principal Deputy Assistant Secretary for Market Access and Compliance ¶9. (U) PDAS Jacobs discussed the newly developed Invest in America program designed to attract foreign direct investment (FDI) to the U.S. Several of the Spanish companies are considering expanding their already significant investments in the U.S., and others are considering investing in the U.S. for the first time. The PDAS reiterated the USG,s interest in open market access and FDI. He also described the balance that exists between state and federal governments on renewable energy issues, and how many states compete to provide the most attractive investment package. GOS Secretary of State Mejia emphasized the importance of SIPDIS ensuring that both governments continue to reduce the cost of doing business and eliminate any efforts toward protectionism, in order to encourage more trade and FDI in both countries. Mejia and Spanish Ambassador Westendorp both raised the possibility of amending the bilateral tax treaty, an issue that Post will take up with the new government that will be inaugurated in April. U.S. Department of State -------------- Paula Dobriansky, Under Secretary for Democracy and Global Affairs Ambassador Reno Harnish, Principal Deputy Assistant Secretary, OES Bureau SIPDIS ¶10. (U) DOS provided an overview of U.S. renewable energy production and policy to encourage investment. PDAS Harnish described the new Energy bill signed in December that includes mandatory targets for renewable energy production. GOS Secretary of State Mejia reinforced that both major political parties in Spain support the ongoing development of renewable energy, and said that climate change represents an opportunity to turn a global problem into a significant economic development opportunity. GOS Director General of Climate Change Teresa Ribera and PDAS Harnish also discussed the challenge of carbon markets and cap-and-trade systems. ¶11. (U) U/S Dobriansky discussed the importance of WIREC 2008 and emphasized the need for the GOS and others to offer a pledge. GOS Secretary General for Energy Nieto committed that the GOS would send a delegation to WIREC 2008. He also said that the GOS agrees with the USG on the importance of including China and India in climate change agreements. GOS Director General of Climate Change reinforced the leadership role that the USG played in U.N. Climate Change negotiations in Bali, Indonesia. U/S Dobriansky discussed the successful outcome of Bali in reaching a post-Kyoto agreement on emissions that includes the developing world, and the important role of the Major Economies process in reaching an agreement. Business Council for International Understanding Lunch -------------- -------------- ¶12. (U) BCIU hosted a lunch led by Theodore Roosevelt IV of Lehman Brothers, and attended by DOE PDAS Mizroch and DOC Foreign Service DG Israel Hernandez. Several U.S. investment banks participated, as well as General Electric and other U.S. companies involved in renewable energy. The discussion focused on the significant interest by financial firms in the U.S. renewable energy market. Roosevelt also made the point that, regardless of which party wins the White House, support for renewable energy in the U.S. is broad-based and will continue into the future. President,s Council on Environmental Quality -------------- James Connaughton, Chairman ¶13. (U) Chairman Connaughton provided an overview of USG investments in large scale renewable energy projects, including $10 billion in loan guarantees. The Chairman provided an in-depth review of investment and production tax credits, including the political process inherent in renewing them every two years and the need for longer term restructuring of the program. The Chairman described the landscape of individual state mandates on renewable portfolio standards, and the expected increase in investment in generation and storage. Opportunities for public-private partnerships for research and development and demonstration were outlined. Chairman Connaughton discussed a U.S.-E.U. proposal to the World Trade Organization to voluntarily eliminate all tariffs on goods and services in the renewable energy industry. He also emphasized that global leaders must pursue a portfolio of solutions in order to reduce emissions that includes renewable energy, carbon sequestration, nuclear energy, energy efficiency and other measures. DOE Office of Energy Efficiency and Renewable Energy -------------- -------------- Alex Karsner, Assistant Secretary, EERE John Mizroch, Principal Deputy Assistant Secretary, EERE Paul Dickerson, Chief Operating Officer, EERE ¶14. (U) A/S Karsner provided an overview of investment and production tax credits, and described the need to restructure this program to remove it from the tax code system. The A/S was adamant about the need for energy companies to make sure lawmakers understood the importance they placed on stable long-term tax credits, rather than always pushing for incremental incentives. Karsner emphasized the importance of advocating for predictability in the industry and said DOE recognizes the need for utility companies to be profitable with renewable energy from the first day of operation. The A/S also discussed the mission of NREL, the various types of research it conducts, and opportunities for public-private partnership that Spanish companies can participate in. State Perspectives -------------- ¶15. (U) To provide a perspective from the state level, the National Governors Association (NGA) assembled a panel that included representatives from the NGA and the state governments of California, Minnesota and Pennsylvania. Sue Gander, the NGA,s Director of Energy, Environment and Natural Resources, described the trends in renewable energy development at the state level. She discussed the strong emphasis that the NGA and its current Chairman, Minnesota Governor Tim Pawlenty, have placed on clean energy, including development of its Clean Energy Future initiative. The state government representatives described the development of the renewable energy industry in each of their respective states and the programs designed to attract investment. Some of the company representatives later held separate meetings with state government representatives. Six Senators -------------- Sen. Mel Martinez (R-Florida) Sen. Chuck Grassley (R-Iowa) Sen. John Thune (R-South Dakota) Sen. Larry Craig (R-Idaho) Sen. Ken Salazar (D-Colorado) Sen. Pete Domenici (R-New Mexico) Several Senate staffers. ¶16. (U) GOS Secretary of State Mejia raised the importance of providing Spanish companies with longer-term security of their U.S. renewable energy investments, and stressed the need to extend production tax credits (PTCs) beyond the 1-2 year renewal period. The Senators discussed the details and importance of PTCs, and the political process around approving extensions of the incentive. Senator Grassley recognized the need to renew PTCs without any interruption to ensure that the industry does not shut down. Grassley said that the extension of PTCs was not controversial, but that determining who will pay for them was. He also outlined the renewable energy segments of the newly passed Energy bill and upcoming Farm bill. Senator Craig discussed the need for a balanced approach on determining who should pay for PTCs and how they should be structured in the long term. Senator Domenici stressed the need for foreign firms to invest in the manufacturing of wind turbines to maintain Congress, long term interest in continuing to provide incentives for the industry. ¶17. (U) Mejia provided an overview of Spanish energy investments in the U.S., including Gamesa,s and Acciona,s investments in wind turbine manufacturing plants. He also raised the issue of Splash and Dash, the provision that allows importation of biodiesel from abroad, blending it with small amounts of U.S. fuel, exporting it and claiming tax credits. Mejia said there was a difference of opinion on its legality under the WTO. The Spanish did not view this as fair trade, and were discussing the issue with the European Commission. Finally, the Senators discussed the urgent need for energy security as a national priority and the important role that renewable energy could play in reducing dependence on foreign sources. U.S. Chamber of Commerce Lunch -------------- ¶18. (U) The U.S. Chamber and the American Chamber of Commerce in Spain hosted a lunch meeting for the delegation. The keynote speaker was Frederick Smith, Vice President of the U.S. Chamber's Institute for 21st Century Energy. Smith discussed the important challenge of energy security and the role it plays it national security. He also described the creation of his organization, and its focus on preparing a national energy strategy document for policymakers. Smith reinforced the importance of addressing climate change in the global context and the need to maintain economic growth while improving the environment. Washington Side Meetings -------------- ¶19. (U) In addition to the full delegation meetings, the GOS officials also participated in valuable side meetings. Energy Secretary General Nieto met separately with DOE officials on nuclear and fossil fuels issues. Climate Change office director Teresa Ribera met with Treasury DAS Ken Peel to discuss the proposed Clean Technology Fund and met with EPA. Secretary of State Mejia met with USTR Schwab and Deputy USTR Veroneau to discuss bilateral trade issues unrelated to energy. Colorado Governor Ritter -------------- ¶20. (U) In a Denver breakfast meeting hosted by the state of Colorado, Governor Ritter described his state's successful efforts to attract investment in the renewable energy industry. Citing solid political support, significant R&D investment through NREL and the state university system, an expanding venture capital community, and favorable natural resources, the Governor made the case for investing in Colorado. Anbengoa Solar, a division of Abengoa, a $4 billion diversified Spanish energy and engineering company, recently opened its U.S. headquarters in Colorado. The governor also said that Danish company Vestas (a leader in wind electricity) is actively investing in Colorado, and encouraged the delegation's other companies to consider investing. National Renewable Energy Laboratory (NREL) -------------- ¶21. (U) The delegation spent a day at NREL in Golden, CO, visiting the lab's national wind technology center and its solar energy research facility. DOE A/S Karsner and EERE COO Dickerson opened the meeting via video conference and provided an overview of NREL. The management team from NREL described the various programs and areas of focus. Program Managers and subject matter experts led discussions of NREL's various international R&D programs, public-private partnerships, enterprise development work with the venture capital community, and concentrating solar power research. Ron Benioff of NREL's International Programs group explored ideas for conducting analysis for the GOS in determining new pricing levels for feed-in tariffs. Ron also provided a brief description of the various cooperative R&D efforts between the U.S. and Spain that already exist. Denver Business Leaders -------------- ¶22. (U) The Denver Metro Chamber of Commerce and the Metro Denver Economic Development Corporation hosted a reception and dinner that was attended by many of the area's business leaders. Joe Blake, Chairman of the Chamber of Commerce, welcomed the delegation and described the favorable investment climate for renewable energy in Colorado. One-on-One Company Meetings -------------- ¶23. (U) The DOC's U.S. Export Assistance Center in Denver arranged for meetings between the Spanish companies and U.S. companies interested in working with them. The DOC created a website about the mission that included descriptions of each company and enabled U.S. companies to register and request meetings. The DOC coordinated each meeting and provided a venue with several meeting rooms. Both Spanish and American company representatives were pleased with the outcome, and several follow up meetings have already been scheduled. Colorado State University -------------- ¶24. (U) GOS Secretary General for Energy Ignasi Nieto led the Spanish delegation's visit to CSU to learn about its renewable energy-related research and development programs. Dr. Bill Farland, Vice President for Research at CSU, provided an overview of CSU's renewables programs and its energy conversion laboratory. The CEOs of three start-up companies, all of which were created and spun-off by the CSU lab, discussed their focus on energy issues. The companies are focused on innovation including the use of algae in biofuels, more effective management of energy grids and improvements in the efficiency of solar photovoltaics. AGUIRRE