The EIB Monday finalized an agreement with Spanish grid operator Red Electrica de Espana to underwrite its portion of 40-mile, high-voltage interconnector, which is meant to help end Spain's status as an "energy island."
The direct-current link, which will use a first-of-its-kind converter technology, will cross the Albera Massif in the Pyrenees Mountains through a 5-mile tunnel being drilled alongside the route of the Perpignan-Figueres high-speed rail line between the two countries.
EIB Vice President Magdalena Alvarez Arza and REE Chief Executive Jose Folgado inked the financing contract Monday in Madrid. It is part of a larger, $440 million commitment between the two reached in October.
The total cost of the project is $882 million. In addition to the EIB financing, it has received a $284 million grant under the European Energy Program for Recovery.
The link, expected to come into service in 2014, is meant to provide a boost for Spain's energy security as well as provide a market for the country's high volume of wind energy.
With the interconnector, Spanish wind energy will be tapped by French grid operator RTE at times of peak demand, while REE will have access to France's nuclear power when its own intermittent wind production is at the low ebb.
Spanish providers must turn their wind turbines off when they generate more power than the grid can safely carry, wasting the opportunity to distribute more clean energy.
The line will run 40 miles between the towns of Santa Llogaia, Spain, and Baixas, France, with roughly half of the new cable in each country.
Its backers say it will double the electricity exchange capacity between Spain and the rest of Europe, from 1,400 megawatts to 2,800 megawatts and will represent the first time in Europe an electricity link of its power will be built using the new "voltage source converter" technology, which can convert alternating to direct current very quickly.
Its backers say the interconnector will help commercialize electricity from Spain's renewable resources and will better integrate the Iberian Peninsula into Europe's overall electricity market, thus improving its competitiveness and lowering electricity prices throughout the continent.
The project has been four years in the making. The agreement between France and Spain to build it was signed in 2008 between the governments of former Spanish Prime Minister Jose Luis Rodriguez Zapatero and French President Nicolas Sarkozy.
Inelfe -- the joint entity created to by REE and RTE to build the interconnector -- awarded the construction of the tunnel last year to a consortium led by Eiffage TP and Dragados.
The tunnel will house the electrical interconnection cables in the section that crosses the Pyrenees, while a trench will be used for the rest of the underground layout. It will take approximately one year to build using a pair of tunnel-boring machines.
Work will begin simultaneously on both sides of the border, the company said.