Spanish Government Facing a Tough Fiscal Situation;Plans Green Energy Subsidy Change
The Spanish Government has been facing a tough budgetary situation due to sovereign debt problems afflicting Europe.The government is trying to structurally reform its Energy Sector to make it more competitive and dynamic.Spain has one of the largest Renewable Energy Capacities in the world due to generous subsidies in the past several years.Though the solar market crashed in 2009 after a “gold rush” in 2008,the Solar Capacity of Spain still ranks No. 2nd in the world.But these subsidies have started to pinch the government which is trying to reduce its Fiscal Deficit.Unlike other countries which pass on the higher Renewable Energy costs to the electricity consumers,Spain has been taking that burden on the Treasury.Recent talks between the Solar PV sector representatives and the Ministry led the association talk of a “possible death” over the proposed retroactive subsidy cuts.There had been a huge alarm raised as there was talks about Spain cutting the guaranteed Feed In Tariff (FIT) for solar which would have led to huge losses for investors beside a massive legal mess. However the Spanish government in the last few days has Moderated its Subsidy Cut plans.
The Renewable Energy Subsidy Change Agreement
The Spanish Industrial Ministry and the Wind and Solar Thermal Sectors have already reached an agreement over the proposed cuts.These subsidy cuts will have very little impact on both of these sectors and will continue to allow them to achieve decent returns.Though the proposal has yet to be passed into law,it seems pretty much a done deal.Note the Solar PV sector and the Ministry have not reached a deal as of now indicating further tough negotiations.The agreement reached has the following features.
- Wind Energy Subsidies for Wind Farms built after Jan 2008 will receive 35% lower subsidies.This will apply to plant built from 2008 to 2012 end.
- The number of hours of operation from Wind Farms will be limited to 2350 Hours per Year for receiving higher electricity rates.However this will turn out to be a non-event as most wind farms operate far less than the 2350 hours.This will also apply to the CSP sector.
- Solar Thermal Plants will not receive favored rates for the first year of operations.There is also an agreement to “delay” the construction of these plants so as not to burden the government with subsidies in these tough years.Note CSP plants normally are much bigger in size and take much longer to permit,construct and start operations than Solar Photovoltaic (PV) plants.
Spain agrees on cutting tariffs for wind, solar power
Spain’s industry ministry has reached agreements with two key renewable energy lobbies, the Spanish Wind Energy Association and Protermosolar, aimed at reducing special tariff premiums for wind farms and solar thermal plants.The accords, disclosed late Friday following months of negotiations,would save around Eur1.3 billion ($1.6 billion) between now and January 1, 2013 largely through a 35% cut for the wind energy sector over the 30-month period.
Spanish Renewable Energy Companies see sharp increase in Stock Prices
This agreement has led to a major increase in the share prices of major Spanish Renewable Energy companies like Accionia and Abengoa.These firms have huge Solar and Wind portfolios and their stock had been battered due to the uncertainty over subsidies.With the agreement over the Energy Policy finally reached,the green investment climate for the Spanish Renewable Sector has improved dramatically.
Iberdrola Renovables SA, Spain’s biggest operator of wind-power plants, rose in Madrid trading after the government announced a preliminary agreement with renewable-energy trade groups on subsidized electricity prices.The shares gained as much as 7.9 percent in Madrid while Acciona SA, a domestic competitor, advanced 6.5 percent. Gamesa Corp. Tecnologica SA, Spain’s biggest wind-turbine maker, rose as much as 3.2 percent.