Spanish Fly: Iberdrola’s $8 Billion U.S. Bet

Spain’s Iberdrola Renovables, the world’s biggest clean-energy utility, said Sunday it will invest $8 billion in renewable energy (wind power, basically) in the U.S. over the next two years. That’s more than the company originally planned to invest in the U.S.

How to read this? For starters, it’s another sign the U.S. wind power market is going great guns regardless of what Congress does for clean-energy tax credits. As we noted last week, the Department of Energy figures wind power could provide 20% of U.S. electricity by 2030—with or without subsidies. And T. Boone Pickens put the first $2 billion down on his $10 billion bet on the world’s biggest wind farm in Texas last week, without waiting for the tax credits to be renewed.

It’s also a sign of how attractive the U.S. is for European clean-energy companies in particular. They have all the tailwinds: size, experience, a strong currency that make U.S. deals look cheap, and hardware. The big players like Iberdrola have already sourced their wind turbines for the next few years, removing one of the industry’s biggest headaches; Iberdrola just took advantage of the strong euro to sign a big deal with General Electric to snag all the turbines it will need for the next two years.

How big is Iberdrola’s bet? The old rule of thumb (1 million euros buys the hardware and pays to install a megawatt of wind power) no longer applies for sure given price inflation in steel, components, and other things that make up turbines. But Iberdrola’s latest U.S. push is clearly in the same league as Mr. Pickens’ 4-gigawatt Pampa Wind Project, the biggest to date in the U.S., and on paper the same size as four smallish nuclear plants.

Of course, there could be another reading to Iberdrola’s sudden rush of enthusiasm. The Spanish company has spent a year trying to win regulatory approval for its 4.6 billion euro purchase of Energy East, a utility operating in the U.S. northeast. So far, the hurdle is New York regulators, worried Iberdrola will dominate the market. Iberdrola, which argues that it is crucial for the future of New York’s clean-energy development, is pressing for a decision by the end of this month.

Perhaps Iberdrola’s big announcement is an $8 billion shot across the bow to preserve the Energy East deal — another offensive in the company’s bid to make itself too big to ignore.