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Cablegate: Spanish Renewable Energy Delegation Energized By

VZCZCXYZ0007
RR RUEHWEB

DE RUEHMD #0315/01 0741245
ZNR UUUUU ZZH
R 141245Z MAR 08
FM AMEMBASSY MADRID
TO RHMCSUU/DEPT OF ENERGY WASHINGTON DC
RUEHC/SECSTATE WASHDC 4482
INFO RUCPDOC/DEPT OF COMMERCE WASHDC
RHEHNSC/NSC WASHDC

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

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