RE horror at Spanish reforms

Spain’s renewable energy industry was horrified by a new reform of the country’s energy system announced by the government on Friday, saying part of the measures are retroactive and violate the principal of judicial security.

The Spanish cabinet had announced a series of measures aimed at reducing the country’s so-called “tariff deficit” of now more than €26bn, which has been accumulated as a result of a years-long disparity between generating costs and state-set electricity prices for consumers.

Among the measures are 3.2%-electricity price increase from August on, a €900m rise in power transmission costs, and a switch in the support for renewables from feed-in tariffs to a fixed “reasonable profitability” of 7.5%, valid retroactively from 2001 onwards and through to 2026.

Companies that enjoyed a greater profitability than that in the past in the future will receive a lower profit.

The government intends to save €4.5bn a year through the reform. Of that, Spain’s power industry will bear €2.7bn – half of that by the renewable energy sector alone.

The reform could give companies even more reason to sue the Spanish government over its retroactive measures.

German utility Stadtwerke München (SWM) earlier this month warned that it and other investors may take legal action against Spain, as previous retroactive changes to support schemes for solar power has caused losses at the company’s Andasol 3 solar-thermal plant in Andalucía.

The Spanish PV Federation, or UNEF, said while it hasn’t received adequate information yet from the government as to the details of the measures, it is convinced that they could lead to the collapse of a great part of a sector that has already been weakened by previous cuts to support of around 40%.

“The Spanish PV sector considers that the announced measures have a retroactive character and – once again – violate the judicial security of the country,” UNEF say in a reaction, adding that Spain’s industry and energy ministry had completely shut out the sector from any dialogue while working out the measures.

The measures will radically change the revenue flows of wind parks across Spain, causing the sector – and ultimately banks – a series of financial problems, the Spanish wind power association AEE warned.

“With this reform, the government increases the uncertainty of the sector further,” the AEE complains, also lamenting the “clearly retroactive” character of some of the measures.

The AEE today told Recharge its technical department is still assessing which exact economic impact the measures will have on the sector. But the association pointed out that the wind power sector had not caused the tariff deficit, and has already seen its profitability reduced to a minimum by previous measures the government took in recent years to cut the deficit.

Shares of some renewable energy companies continued to plunge Monday, adding to steep losses from Friday. Renewables operator Acciona shed 3.6% to €36.60 at 11.15am local time in Madrid Monday, while Abengoa, a specialist in thermal solar power, fell 1.3% to €1.855 a share.