Impact of Spain's proposal to retroactively implement an "Industry Killing" 30% Solar Subsidy Cut on Existing Solar Plants

According to the Spanish Solar Power Lobby ASIF,the Spanish government (under Pressure with Spanish Banks facing Funding Problems and Spanish Bond Yields Rising) is proposing a cut of 30%  in “guaranteed subsidies” to existing solar plants . Under the Feed in Tariff (FIT) scheme implemented by countries to promote renewable energy,power producers are guaranteed a higher rate than the standard electricity tariff to compensate for the highest cost of Renewable Energy. Spain saw a massive boom in 2008,when the FIT rates became very attractive leading to high returns for investors in solar plants.This led to a burst in 2009 as Spain clamped down hard on the Subsidy program drastically reducing the subsidy and slowing down the process of approval.

What will be the Result of this Solar Subsidy Cut

“This (proposal) would destroy the government’s renewable-friendly policy and kill us all off,” Diaz said after solar lobby groups met with Spain’s Secretary of State for Energy Pedro Marin.

1. If the current proposal passes,then the government is sure to see a a loft of Litigation as most investors had put in money with the assumption that the FIT rate received by them was fixed for a tenure of 25 years.
2. It will also seriously Undermine the confidence of Renewable Energy investors in the Spain leading to a virtual halt in Renewable Energy Investments .The FIT scheme is used to guarantee a stable policy regime which allows private capital to make long term investments in Renewable Energy.With the very basis of the FIT policy being overturned by the government,Private Capital will abandon the sector wholesale
3. It will result in Huge losses for Solar Plant Operators with large exposure to the Spanish solar power sector.Spanish renewable energy company  T-Solar has already been forced to delay its IPO.Publicly listed Spanish companies  like Iberdola Renovables,Accionia and Abengoa have also seen a sharp fall in their stock prices
4. Might be a big setback to Solar Investing Globally – This will not only impact Spain but also cause a huge setback to private investments in other countries as investors start questioning the government commitment to Renewable Energy everywhere

Summary

The Spanish government has not officially revealed the changes in its Renewable Energy policy but if the proposal in its current form is implemented then it will have negatively impact on the Spanish Solar sector.The spokesperson for the industry lobby is not exaggerating when he says that it will kill the industry.It has the potential to slowdown the whole European Solar sector as private and bank funding may evaporate due to the increased regulatory risk.If the retroactive subsidy cut was not bad enough,the 25-45% cut on future solar plants is big enough to make the Spanish solar sector a dead one anyway.

Spain wants sharp subsidy cut for solar plants – Reuters

The Spanish government is proposing sharp cuts in subsidies for solar plants, which could hurt both domestic and international solar companies operating in the country, industry lobbyists said on Wednesday.Spain wants to cut existing solar panel plants’ subsidies by 30 percent and future ones by 45 percent for big floor-mounted units and 25 percent for smaller roof mounted ones, Spanish solar power lobby ASIF spokesman Tomas Diaz said.

“This (proposal) would destroy the government’s renewables-friendly policy and kill us all off,” Diaz said after solar lobby groups met with Spain’s Secretary of State for Energy Pedro Marin.”We don’t think the sector can survive if it accepts these proposals,” Diaz said.

An Industry Ministry spokesman declined to comment on the proposed subsidy cuts.