13-06-2014

Spain sets new tariff regime for green energy

A new tariff regime for renewables, cogeneration and waste-to-energy approved by Spain’s government last Friday will save €1.7bn and bring the country’s electricity deficit for 2014 “close to zero”, industry minister José Manuel Soria has announced.

The accumulated deficit, caused by industrial and domestic consumers being shielded from the full costs of power production, is currently €29.1bn. The minister blamed the rising cost of debt financing and premium tariffs paid to green energy producers.

The new system which replaces premium tariffs for production with support based on a so-called reasonable return on investment will provide “the electricity system with financial stability and the sector with certainty,” the minister added.

There is some confusion about the level of guaranteed “reasonable return”. Electricity reform legislation approved last July indicated a return of around 7.5% but, on Friday, Mr Soria quoted a rate of 5.8% due to a fall in the costs of financing. However, a ministry spokeswoman later pointed out that producers would receive a 7.5% return over the whole life of an installation. The retroactive application of the new regime back to July 2013 has led to plant closures in the waste-to-energy and cogeneration sectors. CHP sector association Acogen said production has already fallen by 30% and retroactive application “will lead to numerous lay-offs of workers and hundreds of legal challenges”.

Spanish and international investors, particularly in the solar energy sector, have already launched high-profile challenges to the retroactive change in tariffs. Wind power, which currently accounts for almost a quarter of Spain’s net electricity generation, is set to lose €1.2bn, according to trade association AEE. Its director general Luís Polo said the sector, “which has been the most-penalised by the reform, cannot understand why it has been singled out for unjust treatment when it only represents 11.4% of the regulated costs of the system”.

AEE believes the new regime will not be sufficient to permit new wind power investment in either the mainland or in the Canary Islands, where the government acknowledges that the cost of conventional generation outstrips that of renewable.

Source: ENDS Europe