Spain passes RE reform decree

Spain's Prime Minister Rajoy

Spain's Prime Minister Rajoy

The Spanish government has finally passed a controversial clean-energy decree that brings in an entirely new subsidies regime as part of an extensive shake-up of the country’s power sector.

Madrid argues that many renewables firms made double-digit returns on investments thanks to hefty subsidies in the past – something the industry strenuously denies.

The new measures will cap the earnings of all existing renewable energy projects.

Under the decree, power generators will earn a rate of return for existing renewables facilities of about 7.5% over their lifetimes, says an industry ministry statement. 

This rate, which may be revised every three years, is based on the average interest of a ten-year sovereign bond, plus three percentage points.

The new rules are all part of an extensive shake-up of the Spanish power sector - first announced last July - which are designed to eliminate the growing gap between the system’s revenues and costs.

Industry minister Jose Manuel Soria says the measures have three main objectives: to grant stability to the system, to guarantee reasonable returns on investment, and to provide some certainty, reports Bloomberg.

He claims renewable energy subsidies had to be revised or the power system would have gone bankrupt.

Soria says Spain has already paid out around €56bn ($76.5bn) to support clean energy generators since 1998, and will pay out another €142bn over their lifetimes.  These subsidies, including those for co-generation, totalled €9bn last year.

Several renewables investors have filed international legal complaints against Spain as it has passed a series of measures over the past two years cutting, and in some cases eliminating, green-energy subsidies.

Spain’s Acciona says the decree is retroactive and will destroy the company’s renewable energy investments in the country. It may challenge the new law in Spain’s Supreme Court.

The new measures will be retroactive to July 2013 and many companies have already made extensive provisions and write-downs in their 2013 financial results, anticipating the impact of the decree.

Payouts under the new system will be calculated for each project, taking into account hundreds of parameters that will be published in a separate ministerial order.

Wind is expected to be worst hit with assets installed before 2005 expected to lose the right to subsidies, receiving only the wholesale power price. Newer assets will receive the wholesale price, plus a separate remuneration.

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