Early cuts resulted in legal action against Madrid from over a dozen investment funds with stakes in the country’s solar market, adding to the unease of foreign investors.
In the latest move to draw down Spain’s energy sector debt, Madrid unveiled a new clean energy bill this week that will cap earnings on power plants as well as introduce retroactive actions, earning a quick rebuke from the country’s already ailing renewable sector.
According to a Bloomberg report, clean energy “generators will earn a rate of return of about 7.5 percent over their lifetimes,” adding that the rate may be revised every three years and is based on “the average interest of a 10-year sovereign bond plus 3 percentage points.” The new plan will be retroactively applied to programs active from July 2013.
The new plan was presented by Spain’s Industry Minister Jose Manuel Soria as a necessary evolution of the country’s renewable energy subsidy system, which he said would have gone bankrupt if no changes were made. Since taking over the country’s leadership in 2011, the right-leaning Partido Popular has continued to expand on earlier efforts to chip away at the country’s renewable energy support programs, which many critics have called unsustainable. Once hailed as one of Spain’s most viable sectors for strong growth, renewable energy has suffered under a steady restructuring of government support programs.
In addition to slowing the country’s solar power and wind energy growth, the restructuring garnered legal action on the part of both international investors and domestic trade organizations, the latter of which has appealed to the European Commission for some level of protection from tariff and agreement reductions. Early cuts resulted in legal action against Madrid from over a dozen investment funds with stakes in the country’s solar market, adding to the unease of foreign investors.
In February of last year, investors in some of the country’s concentrated solar power plants have sought out legal representation for what they say will be a multi-billion dollar fight. This effort came two years after a similar legal push on behalf of investment funds in protest of earlier government actions, this latest round focuses on fresh legislative action passed last week. Industry lobbyists and CSP investors worried that coupled with a 7 percent energy production tax passed in late 2012, the government actions related to the feed in tariff system would “virtually wipe out profits for photovoltaic, concentrated solar thermal and wind energy plants,” according to a Reuters report.
Despite industry protests and appeals to both the courts and the European Commission, Madrid and the Rajoy government have continued to introduce new measures to reduce support systems and earnings associated with new and existing clean energy projects.
Similar measures have been seen in a number of Southern European countries, including Italy and Greece, as governments have struggled to rein in spending and restructure tariff programs that are more in line with current solar and wind costs. However, few have been more detrimental to the stability of the renewable energy sector as Spain’s cuts have been.