Once a booming sector of the Spanish energy industry, manufacturers now face an uncertain outlook for demand and state subsidies, industry leaders say.

Increasingly, windmill manufacturers are tilting for business in countries such as Scotland, China and Brazil.

"The inadequate regulatory framework, the plunge in energy demand and the difficult financial conditions have created a climate that has pushed Spanish business to accelerate development internationally so as to survive," said Jose Donoso, president of the Association of Windmill Businesses.

In just the past few weeks:

-- On August 27, the Iberdrola energy group, the world's number one producer of wind energy, won a contract to build nine windmill parks in Brazil.

-- On September 13, the group launched a 4.8-billion-euro (6.5-billion-dollar) investment plan in the United Kingdom, mostly in Scotland, up to 2012.

-- On September 14, Gamesa, one of the world's leading windmill manufacturers, decided to triple investments in China from 2010-2012.

The flight overseas could place at risk Spain's position as the world's fourth largest producer of windmill energy, which accounted for 12.5 percent of its energy in 2009 fuelled largely by a policy of active support in recent years.

Windmills stretch across large sweeps of the Spanish landscape, providing a dramatic reminder of the investment to travellers.

Madrid has planned greater use of wind power, with a target of 40,000 megawatts in 2020 against 2,000 now.

But the windmill businesses' association said growth in the sector had braked: in the first half of 2010 installed capacity grew by just 727 megawatts, well below the average annual rate of 2,000 megawatts.

The Spanish government is already tightening its belt. In May 2009, it imposed on windmill makers a requirement to request authorisation for new installations.

"This provision has added a new level of complexity to the approval process for wind farms, and also led to considerable delays as companies had to wait for up to seven months before being informed if the projects they submitted had been included in the register," the Global Wind Energy Council said in its annual report.

"These delays resulted in the loss of thousands of jobs and the closure of some component and wind turbine manufacturing facilities."

Another blow fell in July this year, when the government decided to reduce by 35 percent the bonuses provided to windmills until 2013. The draft law is expected at the end of this year, leaving the sector uncertain about its content or even the date it will come into force.

In contrast, Acciona, a public works group that has diversified into renewable energies, secured on August 17 a 10.3-million-euro, 10-year subsidy from the Canadian government for its fourth windmill park in the country, to come on line at the start of 2011.

Moreover, "the legislation regulating the sector from 2013 still has to be approved, " said Donoso. "It is crucial that this framework be set as soon as possible so that businesses know what the rules of the game are for the future."

Investors detest uncertainty. Over one year, Gamesa shares have lost 56 percent of their value, Iberdrola Renovables (the renewable energy business) 27 percent and Acciona 31 percent.

"We are going through a worrying period without defined regulations for renewable energies," Iberdrola chairman Ignacio Galan complained recently.

The company said it was nevertheless "confident" about the draft law and it expected bonuses to return to normal levels after 2013.

Jose Calvet, chairman of Gamesa, also called for "a clear and stable regulatory framework."

His country of birth represented only 11 percent of the company's sales in the first half of this year, against 33 percent a year earlier, and the priority markets are now China, the United States and India.

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