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Spanish Government suspends renewable energy incentives 'temporarily' to tackle funding deficit

The Spanish Government has "temporarily" suspended financial incentives for new renewable energy projects, it has announced.01 Feb 2012

In a statement (in an automatic translation from Spanish), the Spanish Council of Ministers said that  the suspension was intended to tackle a payment system that "entails costs which are too high for the electricity system and lead to a continuously rising tariff deficit".

The Spanish energy deficit, or difference between costs paid by consumers for their electricity and what the same electricity costs suppliers to deliver, currently stands at €24 billion, it said.

The Government said that the move would give it time to reform its current system of financial incentives for projects which generate electricity from renewable sources, including waste and combined heat and power systems; and insisted that the move would not "threaten security of supply or compliance with the European Union's renewable energy targets".

"Maintaining the current pay system is not compatible with the current economic crisis," it said.

Facilities which have pre-registered for the scheme or are already operational would not be affected, it said.

The Spanish Photovoltaic Union (UNEF), which represents industry associations in the solar sector, said that the move would "aggravate the situation of the Spanish photovoltaic sector", which has recently been affected by retroactive cuts to particular financial incentives aimed at encouraging the construction of small-scale solar photovoltaic (PV) projects.

Spain is one of a number of countries currently investigating ways of reining in the costs of renewable subsidies as technologies prove more popular and cheaper to install than originally envisaged. Germany, which is the biggest market for solar power in Europe, is investigating further cuts to its own subsidies according to press reports while the UK Government will reduce feed-in tariffs (FiTs) available for small-scale solar PV projects installed after 1 March 2012 from April.

The UK recently failed to overturn a High Court decision that its plan to speed up cuts to FiTs  for solar projects was unlawful. However, in a written ministerial statement shortly after the decision Energy Secretary Chris Huhne said that the Government "respectfully disagreed" with the decision and would be seeking permission to appeal to the Supreme Court.

"We want to maximise the number of installations that are possible within the available budget for FiTs, rather than use available money to pay a higher tariff to half the number of installations. Solar PV can have a strong and vibrant future in the UK and we want a lasting FiTs scheme to support that future and jobs in the industry," he said.

Together with other countries in the European Union, Spain has committed that 20% of its total energy consumption will come from renewable sources by 2020. The Government said that renewable sources covered 33% of the country's electricity demand in 2011, making Spain "one of the most advanced countries in this regard". The Government also recently passed its Renewable Energy Plan to give it a "comfortable margin of manoeuvre" in meeting its targets.

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