Policy & Market

More

Spain to vote on 7% tax on renewable power generation

Spain’s Senate is today due to vote on a reform of its energy sector that includes an even harsher than planned, across-the-board tax on electricity generation that would cost renewable power producers hundreds of millions of euros.

The majority Popular Party of Prime Minister Mariano Rajoy is trying to hike the levy to 7% from the 6% that had originally been envisaged in the austerity-racked nation.

The reforms before the Senate – Spain’s upper house – also include a levy on nuclear, large-scale hydropower and solar-thermal.

The Spanish wind energy association, AEE, says at the higher rate the new tax would hit the sector by some €300m ($392m) annually.

But even at the 6% announced in September, the tax would hurt. Renewables group Acciona would have to digest a reduction to its earnings before interest and tax (Ebit) of €80m to €100m a year, the company’s director for corporate development, Juan Muro-Lara, said in November. The company has interests in wind, solar and hydropower.

Spain’s lower house, its Congress, would still need to approve the higher rate for the new generation tax, which would kick in on Jan 1, 2013.

The Spanish wind sector is struggling with additional difficulties beyond the tax.

The current regulations governing the development of new wind farms expire at the end of this year, and AEE has previously criticised the government for failing to start discussions over what will replace them.

Spain’s wind power industry will continue to shrink if the government fails to establish a stable and predictable new regulatory framework that offers incentives to the sector, according to a study by Deloitte released this week.

Some €27bn in investments could be lost if the current uncertainty isn’t addressed, Deloitte claims.

The AEE estimates that around 1GW of new wind generation capacity will be installed this year, but warns this will come to a virtual standstill in 2013 without new rules for the sector.

The share of wind power in Spain’s gross domestic product (GDP) fell every year between 2009 to 2011, while 14,319 direct and indirect jobs were shed since end-2008, the Deloitte study says.

The wind power sector contributed €2.62bn to Spain’s economy in 2011, representing 0.24% of the country’s GDP, Deloitte said.