Spain kills Feed-in Tariff for renewable energy

Published on: Saturday, 13 July 2013
VP Soraya Saenz and Minister of Energy Jose Manuel Soria

Spain's government has announced the end of the Feed-in Tariff (FiT) system for renewable energy. The Minister of Energy, Jose Manuel Soria, explained in a press briefing on Friday, after the weekly Council of Ministers' meeting, the keenly awaited energy reform intended to fix a structural cumulative deficit of 26 billion euros.

The measures undertaken to tackle with the rising annual tariff deficit -about 4.5 billion euros for 2013- include a 900 million euro raise in consumer's energy bill, another 900 million euro to be charged to state budget and a 2.7 billion euro reduction in regulated costs -transmission lines, FiT and other costs-. The reduction for the 'special regime' -which includes renewables, cogeneration and waste to energy- will account for roughly half of the regulated costs cuts, about 1.35 billion euro.

Regarding the renewable energy sector, the reform kills the FiT system which was expected to last for 25 years in the case of the Concentrated Solar Power sector. The government has established a new regulatory framework where CSP and other renewable energy generators will receive a "supplement to their investment costs according to the technology" to allow a "reasonably profitability" which has been fixed at 7.5% for the next six years.

Despite the announcement, a lot of more details are yet to be known. These new measures will be enacted in a Law and a Royal-Decree Law to be approved this year. The Spanish CSP industry association said to Bloomberg that the new system of "giving a guaranteed rate of return is a lesser evil, but we think the level is very low". The association believes the return could be about 5% after taxes.

According to Reuters, citing an anonymous source from Ministry of Industry and Energy, the financial costs will not be taken into account to set the 'standard investment costs' for each technology, what could put in risk some plants, especially some highly-leveraged photovoltaic plants.

This new change in the regulatory framework comes after some major changes where applied to the current FiT system to reduce payments to renewable energy generators, what has led to companies and investment funds involved in the sector to sue the Spanish government. Asked about this issue, the Minister claimed these measures are supported by previous decisions from Supreme Court.

Is Spain there are currently 45 operational plants with a total power of roughly 2 GW, 6 plants under construction totaling 300 MW and another 50 MW plant included in a special tender yet to start construction.

 

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