Did Pension Fund Pressure cause Spain to reconsider its Retroactive Solar Feed in Tariff (FIT) Cut?

The Spanish Government had been rumored to retroactively cut 30% of state guaranteed Feed in Tariffs for Solar Energy.This has led to a huge protest from the Spanish Solar Industry as well as major global Renewable Energy Investors.Note Spain has the Second Largest Solar Installed capacity in the world.Favorable returns from solar plants had led to a huge gold rush in 2008 leading to an equally dramatic crash.From more than 2.5 GW of solar capacity added in 2009,the market declined by 90% in 2009 as Spain clamped down hard on new solar installations.The Feed in Tariff scheme which has been implemented in many countries allows for higher fixed electricity rates for renewable energy generators.One of the main attractions of this subsidy is that it gives the investors a stable fixed return compared to other forms of Renewable Energy Subsidies.

From Investor’s viewpoint, the Spanish proposal of retroactively reducing the subsidy would have violated the Spirit of the Law if not its Actual Wording.It would have been a first in the Feed in Tariff policy in the world as no one has done a retroactive cut before.It could have seriously dented the Industry not only in Spain but also in other parts of the world.Investors would be highly reluctant to invest in a Sector where government would Arbitrarily change the rules of the game in the middle.This could have also led to a dramatic setback for the European Union’s lofty targets on Climate Change Mitigation and Renewable Energy targets.Private Capital is an essential factor in promotion of  Renewable Energy  and this Spanish action might have devastated this source of funding.There has been news that Investors had been pressurizing the Spanish authorities in reconsidering their action.There had also been reports that investors might consider legal action on the European Union level as well as potential backlash against Spanish Government Bonds as well.Most of these reports had been quite vague but a recent report explicitly mentions that Danish Pension Funds writing to Spanish and EU authorities voicing their concerns.With such Big Heavyweights joining the fray,its no wonder that Spain is reconsidering its whole Renewable Energy Policy.

Danish pension funds take on Spain over solar tariffs – IPE

AP Pension, PensionDanmark and PBU, three Danish pension providers with assets totaling €30bn, have written to the Spanish government and the EU Climate Action Commissioner voicing their concerns about Spain changing the tariffs for its solar power industry retroactively.The three providers, with some 700,000 members, have been investing in the Spanish solar power sector for the past two years as part of their socially responsible investments.Through its consortium, Green Power Partners, the funds have committed to invest €100m in the renewable energy projects, including €25m in Spanish solar energy plants.In their letter to Elena Salgado, Minister of Economy and Finance, and Miguel Sebastian, Minister of Industry, Tourism and Trade, the trio expressed their concerns about reports that the Spanish government may consider changing the structure and/or the level of feed-in tariffs that have been committed to the solar plants commissioned in the past three years.Peter Olsson, chairman of Green Power Partners and head of property at AP Pension, said the move, if true, could spell the end of the renewal energy sector and cause huge damage for years to come.

Spain and Italy rethink their plan of Renewable Energy Subsidy Cuts

With the Solar  Association of Spain giving dire warnings and Investors ready to sue the government,their has been apparently  been a change of heart .Recent reports from Spain indicate that the government is rethinking its policy of Green Energy Subsidy Cuts.First  Fotowatio  CEO said that he thought that the retroactive cut would not happen after meeting with the deputy Industry Minister..Second the Spanish government has postponed its recent July 1 deadline on Energy Reforms.It will try and build a consensus on the country’s Renewable Energy policies after talking with the main Opposition Party.It seems a good decision,since Renewable Energy Investment requires first and foremost a stable government policy.