Portuguese Parliament says renewables are not exempt from tax

The Portuguese Parliament has approved on Friday a proposal submitted by the Left Bloc (Bloco de Esquerda), a member of the European Anti-Capitalist Left and of the Party of the European Left, to eliminate the exemption for renewable energy producers from paying the so-called Contribuição Extraordinária sobre o Sector Energético (CESE), a tax imposed in 2014 on all conventional energy companies to help reduce the country’s tariff deficit issue.

The Left Bloc claims that the inclusion of renewable energy companies in the payment of the tax will result in a €250 million reduction of consumers’ energy bills.

According to the text of the approved proposal, the CESE tax must now be paid by all individuals or legal persons that operate in the national energy sector, including those renewable energy producers that are operating under a special tariff regime.

The tax, which will be applied to renewable energy producers starting from 2018, is calculated based on a company’s assets comprising tangible fixed assets, intangible assets, and financial assets allocated to concessions or licensed activities.

The tariff deficit in Portugal is mainly due to the fact that, prior to the economic crisis of the recent years, retail electricity tariffs were set below costs, including subsidies to renewables. The Portuguese government is planning to completely eliminate the tariff debt by 2020.

As for the solar energy sector, the impact of the tax should be rather limited, as most of Portugal’s installed PV capacity currently comes from residential and commercial PV installations. According to the latest data from the Directorate General for Energy and Geology (DGEG), Portugal had only 474 MW of cumulative registered PV capacity at the end of July 2017, of which approximately only 300 MW is currently connected to the grid. Wind and hydropower, instead, have the largest renewable energy market share with each more of 4 GW of installed capacity.