Spain’s energy reforms

Here are the main aspects of the Spanish government's changes affecting the renewables industry.

Profit cap at 7.4% | The government abolished the previous system of feed-in tariffs. Instead, remuneration for renewables plants will be capped at a “reasonable profitability” for the whole life of a project. According to draft proposals, this rate is due to be based on Spain’s ten-year benchmark bond plus three percentage points, which currently amounts to close to 7.4% before tax, or about 5.2% after tax. The cap will affect new projects and those that have come on line since late 2004. The regulation became law in July last year, but it will not come into effect until the final version of a ministerial decree is approved by Spain’s energy regulator.

Tax on power generation | A new 7% tax on any power generation — renewable, fossil fuel or nuclear — kicked in on          1 January 2013. This levy is estimated to cost the wind sector €300m ($412m) a year.

“Solar tax” on self-consumption | Anyone generating their own renewable energy will have to pay a “grid back-up toll”. Dubbed the “solar tax” as it mostly hits PV installations, the levy will increase the length of time it takes to recoup investment costs for rooftop solar from about 12 years to 35.

Payments for capacity markets | A new law is in the making for renewables companies to pay fees to energy producers that provide back-up power when there is little wind or sun.