Spain slashes crippling subsidies by 30%

In addition to trimming subsidies, the package freezes electricity prices for at least five million Spanish families. It has been estimated that the change in policy will lower consumer energy bills by as much as €4.6 billion through 2013.

Renewable Energy Magazine    December 23, 2010

Spain’s cabinet of ministers today approved a three-year, 30 percent cut to solar power subsidies, a move that potentially could save the government €740 million but has also led to widespread anger among investors in the sector, according to published reports.

In a written statement following announcement of the decision, Spain’s Photovoltaic Business Association (La Asociación Empresarial Fotovoltaica) described the move as a “clear attack on the solar photovoltaic industry and the economy and sustainable energy policy”.

For AEF, the statement continued, “the measures announced are clearly retroactive, have been issued without regard or industry, or investors or banks, and lead inexorably to a bankruptcy of the vast majority of Spanish PV.”

The reduction in subsidies is expected to affect a wide range of solar power projects, and is in line with the contention of some Spanish officials that the industry has grown much faster than the government anticipated in its long-term planning.

But Deputy Industry Minister Pedro Marin was quoted in The Wall Street Journal and other publications this morning as saying he expects the sector to remain profitable despite the reduction and subsidies and that today’s action will provide the government with more leeway in terms of controlling energy prices charged to consumers.

In addition to trimming subsidies, the package freezes electricity prices for at least five million Spanish families. It has been estimated that the change in policy will lower consumer energy bills by as much as €4.6 billion through 2013.

According to most estimates, solar capacity in Spain has climbed to more than 3,200 MW in recent years, six times what government officials expected by the end of 2010.

As a result, the deficit, or the shortfall between what power companies are allowed to charge consumers and the revenue guaranteed to them by the government, has spiralled in recent years. The situation resulted in a €15 billion tariff deficit to electricity producers that the government is pay back by issuing debt.

But angry investors have warned that the reduction of the subsidies may now trigger a wave of loan defaults by companies in the sector.

Francesco D’Avack, a Solar Analyst for Bloomberg New Energy Finance, said in the publication today that the reduction in subsidies is “a massive blow against the Spanish photovoltaic industry and anyone who invested in the boom”.

“This decision could undermine investor confidence in any renewable assets backed by government contracts,” he said.

Meanwhile Juan Laso, president of La Asociación Empresarial Fotovoltaica, has told the Financial Times of London that the decision to cut subsidies “implies bankruptcy” for many in the nation’s solar sector.

On its Web site, the association lamented that its “worst fears have been met” and that the reduction in subsidies is “discriminatory against PV”.

“[This] cutting is not balanced with respect to other technologies, both conventional and renewable, and even it is between regions, and imposing a limit of one hour regardless of different communities and different solar radiation, the technological characteristics and business plans investment,” the association said.

“These measures will generate retroactive costs ten times more — for their impact on international markets and debt of the Kingdom of Spain — that the supposed savings from them, as expressed by some leaders of foreign investment and national and international banking,” it continued.

The organization said it has made an “urgent appeal” to Spain’s Congress of Deputies, with the hope that the legislature can “correct the blunder and the imbalance posed by the Ministry of Industry with a Royal Decree-Law which offers significant technical and legal gaps”.

For additional information:

La Asociación Empresarial Fotovoltaica

The Financial Times

The Wall Street Journal

Bloomberg News

16 thoughts on “Spain slashes crippling subsidies by 30%

  1. Being GREEN works until you run out of other people’s money….kinda like socialism

  2. “This decision could undermine investor confidence in any renewable assets backed by government contracts,” he said.”

    ughhh…my heart breaks…..

    They’re angry at the mess that they themselves created.
    What did they expect?
    Dear Dalton,
    Let me tell you a story…a bad, sad story…

  3. poor bloody investors!……………anyone who invests in this inhumane Industry should actually lose every dirty cent they have counted on because morally they were BANKRUPT right from the start!

    Who brought this whole planet to the brink of devastation in the first place?……….GREEDY INVESTORS!

    The days of reckoning have begun!

  4. Sorry Barbara……..I will also vilify those two categories of idiots………..except they are just insane and need to be medicated while the Investors are just plain evil………………

  5. Tell me how anyone did not see the cuts coming? Just ask yourself why wind companies were being flipped so fast? Most investors want in to make money which one can do by building and selling wind developments. Running wind turbines is not the money maker being suggested by companies trying to sell to new investors. No investor in Spain’s renewable energy projects should be surprised about the cuts; they knew they were coming. Maybe they had hoped to be out of the wind market before the cuts were announced. Who wants to buy something in which 30% reductions should be considered just a start? More cuts can be expected as the 30% will see less money flowing past the investors (less money left to flow to the political parties and NGO’s) to sell the false ideology of wind. Less money to buy off the media so just maybe more will start reporting the truth. No government is an endless money pit, especially for the greenies. Spain is just the start. In Ontario cuts to green projects have already been considered so it is only a matter of when there will be cuts in Ontario. Smarter governments would have saved a lot of money avoiding the wind scheme.

  6. This is kind of a preview of what will follow here when the gold rush end’s .It really shows how the players of an industry funded by the people will collapse as fast as they grew.Then the lawyers will have their field day as lawsuits will prevail when the rats try to flee without the financial support it needs to survive.So history may again repeat itself as each country comes to this conclusion after the damage has been done.Another plan ,that was not well thought out .

  7. It only makes sense as the long term plan is to lower the cost of renewables. The only way to make renewables more competive is to lower the subsidies.
    Ecomonies of scale are making solar very cheap and the margins that solar operatators are making today are way too large under todays subidies.
    If gov’ts keep doing this (lowering subsidies), we could someday see solar competitive with nuclear/coal…but not if they keep paying 40-80cents/kw!

  8. Ecomonies of scale don’t always work. Solar at this latitude is not practical on a commercial scale as it also requires backup power sources.

    If individuals wish to install solar on their own property and pay for it then they can supply their own needs. However,they should not expect to sell excess power to the grid at public expense.

  9. In case there are any “investors” scouring this page and feeling that they have been unfairly judged as being immoral or even downright crooked, then tell us all how the Carbon Trading that has evolved for “investors” is a legitimate and honourable scheme after reading this:

    “””The Austrian online Kleine Zeitung here reports that Europol have raided an elaborate CO2 emissions scam in Italy and have arrested more than 100 persons. The Kleine Zeitung writes: “The damage runs in the billions of euros”.”””………………….

  10. “lead inexorably to a bankruptcy of the vast majority of Spanish PV.”

    Ok… How is this bad thing?

    I wonder how long before we follow suit.

    I hope it’s soon!


  11. My neighbour down the road has solar panels covering the side of the barn….Unfortunately the panels have been covered solid with snow for the past month or so…Can that be a good payback ?

  12. Investors are suffering too! Have you no compassion?

    “TORONTO — Recent growth in wind energy projects in Canada could be undermined if a big federal tax break is not renewed when it expires next spring, industry watchers say.

    After a shot in the arm for the industry last week, when Ontario announced more than 600 direct jobs would be created with the opening of two new wind turbine parts factories next year, the sector’s main lobby group hopes that incentives for the industry will continue to flow.

    They’re concerned because the $1.48-billion federal ecoENERGY for Renewable Power program, which gives companies one cent per kilowatt hour as an incentive for renewable energy projects, is set to end in March.

    The Canadian Wind Energy Association has lobbied the federal government to extend the incentive program past the March deadline, but says it believes Ottawa is unlikely to do so. “

  13. We should all be contacting our Federal MP to insist that the ecoENERGY grants not be renewed.

  14. I am one of those people who wish to power their own homes with their own power and I hate to point out to you that it HAS been the global subsidation of solar that has contributed to this industries progress. See below.

    Without gov’t subsidation, solar panels would have just remained a curiosity for campers and do gooder enviro types.
    In my neighbourhood there are countless electricians that are now experts in installing solar as well.
    That being said, the costs are still too high and subidies need to be ratcheted down to see how low the solar industries prices can go and still be profitable.
    I’m hoping that I can buy a 20KW system (for the size of my roof) for less than $30000 in the next year or two (which would now cost me $50000-60000)
    By that time after a year or two of TOU, it will be a luxury. No HST, no doing laundry at night, no debt retirement charge…

  15. Joseph:

    Installing ind Power so that you may dry your clothes with electrically produce heat is a fantasy. Nor is cooking easily possible. If you don’t believe me — calculate the amperage draw to run the devices.

    I recently attended the Home and COttage show (as a side show) and asked those questions of the “Alternative Energy Vendors”. They all said the same thig — more or less — “Not impossible, but not recommended and highly unlikely that it can be done” . Those are the correct answers.

    If that is you motivation, I hope you can get a “free” gas supply as that is the only readily available alternative that can take you off the grid. Gas delivered in tanks. Been there done that — it’s how we run our camps — which most would describe as villages.

    We are looking at windpower — but I think we have a firm grasp on the many limitations.

    Let us know how it works out.

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