Spain to cut PV premiums

It said that the cuts will particularly affect photovoltaics, with reported reductions of €1,050 million. The current remuneration, it said, will also be replaced by a regulated rate, which will provide companies with a rate of return on investment of between 7 and 8 percent.

When asked to confirm these details, Spain’s Ministry of Industry told pv magazine: “The Government is reviewing current bonuses granted to renewable energies – wind, thermo solar, photovoltaic, bio-mass, etc. – in order to update them according to the rules in force. It is presently discussing the matter with various affected sectors and no decision has been adopted. It is therefore too early to discuss the details of future regulations at this stage. The Government intends to present the new framework of rules prior to the forthcoming 1st of July.”

It’s still not clear which cuts may be coming in Spain’s system of compensation for photovoltaics. Yet there’s one word in particular that sends a shiver down the spine of the industry and associations: retroactivity. From the scene of negotiations between the Ministry of Industry and solar energy associations, word arrives that the proposed law for the imminent Real Decreto (Order in Council) is to reduce the generous tariffs of the Real Decreto 661/2007 to a “reasonable return.”

Law-makers consider in the new bill a return between 6.5 and eight percent reasonable. This is a considerable point of tension in the continuing discussions between associations and the Ministry of Industry. In practice, the passing of the law will entail the revaluing of more than 50,000 installations which were connected under the generous Real Decreto 661/2007: a titanic bureaucratic endeavor.

Yet the Spanish government seems determined to get rid of its deficit in the state-guided energy sector and has particularly gone after the compensation of solar energy within this. In the boom year of 2008 alone, 2601 megawatts were installed that were entitled to the high tariff of RD 661/2007 for 25 years.

In any case, the Spanish Ministry of Energy is currently experiencing a countermovement that it had not yet experienced in photovoltaics matters. In a joint statement, the industry associations ASIF (Asociación de la Industria Fotovoltaica), AEF (Asociación Empresarial Fotovoltaica) are Appa (Asociación de Productores de Energías Renovables) are warning of “changing the rules of the game during play.”

According to them, such a move would not only damage the sector but also Spain’s prestige abroad. This does not seem to be an exaggeration: even U.S. Vice President Joe Biden did not refrain from telling the Spanish government that the U.S. firms affected are strictly against measures which would seriously endanger their investments in Spain.

Prior to this, ten large international investors including Solar, Hazel Capital, Hudson Clean Energy, Impax Asset Management and NIBC Infractures Partners had demanded that the Zapatero Government did not jeopardize their investment of around three billion euros of capital in the Spanish solar sector. This would undermine confidence in the legitimacy of the Spanish investment market and impede new investment.

To the surprise of nobody, Spain’s banks are also making clear noises. According to the assessments of Juan Laso, President of AEF, Spanish financial institutions have loaned money to solar projects to the tune of around €15 billion. As Àlvaro Bergasa, a financial expert for renewable energy by the bank group Banesto, warns: “60 percent of projects are supported by loans. Existing projects have no margin for retrospective cuts.”

This broad alliance against the planned alteration of the laws for provision for installations is giving the associations hope before the day of decision. On June 16, the industry associations are invited to the Ministry and the Minister of Energy Sebastian will inform them if the dreaded ‘R-word’ is to become a reality.