New pain for Spanish renewables

Spain’s renewable energy industry faces more pain after its government announced new measures designed to close the country’s tariff deficit.

Renewable projects will be subject to a new framework based around “reasonable profitability”, which the government indicated would be set at 7.5%, as part of a wider plan designed to save an extra €4.5bn ($5.9bn) this year – of which Spain’s power industry will bear the brunt at  €2.7bn.

There were few further immediate details of the reforms, but the announcement sent shares in Spanish power companies plunging.

Renewables operator Acciona fell 8% in afternoon trading in Madrid, while utility giant Iberdrola was 3.5% lower.

The plan unveiled in Madrid this afternoon will “correct a key imbalance in our economy”, according to deputy Prime Minister Soraya Saenz de Santamaria.

The tariff deficit is the €25bn shortfall created as a result of the long-standing difference between generating costs and consumer prices.

The reforms – although expected – are another big blow to Spain’s renewable generation sector, which has already suffered support cuts, regulatory changes and new taxes as the debt-laden country tries to sort out its finances.

Ahead of the latest reforms, fears were raised about the ongoing viability of some projects as their profits are eroded.