Spanish Government cuts solar subsidies for new and existing plants

On Christmas Eve the Spanish Government made the controversial decision to again cut the financial support offered to solar power generators. The unstable budget situation in the country has forced the Government into a corner in which it will now make significant cutbacks to subsidies for PV plants installed on the Iberian Peninsular, with the additional reduction affecting existing as well as new installations over the next three years.

EuPD Research says that the impact this “breach of trust” is likely to have is unpredictable.

The Government’s proposal involves a cap being placed on the number of hours of subsidized generation that solar plants can sell to the grid. Where up to 1,753 hours could have been fed to the grid by fixed PV systems in the past, a maximum of 1,250 processing hours will be remunerated over the next three years.

Additionally, systems mounted on single axis trackers will now only be funded for the first 1,644 hours; systems with double axis trackers will see payments for the first 1,707 hours only. An adjustment that will apply to all PV plants connected to the grid by September 2008. As a form of reimbursement, PV plants will receive the feed-in tariff payments for three more years – an extension from the original 25 years to 28.

EuPD Research’s Daniel Pohl reports that according to Spain's Deputy Industry Minister, Pedro Marin, these reductions are necessary to grant the government "some leeway" in keeping consumer energy prices at a moderate level while Spain navigates its way through tough times of economic uncertainty. However, Pohl points out that the opposite is to be heard from the side of investors and analysts. “Such hasty changes are considered a breach of trust and increase uncertainty throughout the whole renewable energies industry in Spain,” explains Pohl.

“Exactly how the latest cut backs to solar funding will be felt throughout the industry cannot as yet be foreseen. However, analysts at EuPD Research believe that the impact will be significant,” continued Pohl.

“But not only the PV industry and its directly or indirectly related spin off industries will suffer from the decision made in Madrid – millions of Spanish senior citizens and pensioners, as well as fund investors all over the world will feel the impact of this decision,” said Markus A.W. Hoehner, CEO of EuPD Research, based in Bonn, Germany.

The Valencian Association of Energy Companies (AVAESEN), which represents approximately 170 companies and organizations linked to the region’s renewable energy sector, is suing the Government over the new law.