Parliament reinstates retroactive cuts for Spanish solar

As expected, Spain’s lower house of parliament has rejected a recent amendment from the Spanish Senate that would have overturned retroactive cuts to solar subsidies. But trade bodies are hopeful after the industry ministry promised to “find solutions to prevent irreparable damages” to the sector.

In a move widely expected by the photovoltaic (PV) sector, Spain’s lower house of parliament rejected a proposal from the Senate, or upper house of parliament, that would have effectively overturned recent retroactive cuts to solar subsidies.
Earlier this month, the Senate had approved an amendment to a forthcoming law on sustainable economic growth that would have neutered the retroactive cuts outlined in Royal Decree 14/2010, which has the potential to reduce solar subsidies by up to 30 percent. The decree works by retroactively limiting the number of production hours eligible to receive the government’s feed-in tariffs.
For PV producers and trade associations – which have already condemned the lower house’s decision – the rejection means continuing the fight against Royal Decree 14/2010 in the courts. However, trade bodies like Spain’s Asociacion Empresarial Fotovoltaica are hopeful that a compromise solution can be reached with the government, after Industry Minister Miguel Sebastian sent a letter to PV investors promising to “find solutions to prevent irreparable damages” to the sector.
Royal Decree 14/2010 was approved late last year to howls of protests from PV trade bodies, solar investors, some Spanish regional authorities and the European Commission. The regional authorities of Extremadura, Murcia, Navarra and Valencia have already appealed to the courts against the decree, arguing it is unconstitutional. They are also warning that potential indemnity payments to PV producers may cancel any gains expected from the tariff cuts.
European Energy Commissioner Gunter Oettinger also expressed his dissatisfaction with the law, warning that “forward-looking changes [to tariffs] may be understandable and necessary, but the European Commission will not accept retroactive amendments”.
The Spanish PV sector has become a victim of its own remarkable success, as Spain rocketed to the top of the world’s solar power producers. Its success happened on the back of generous government subsidies that, in 2009, amounted to €2.7 billion of PV tariffs. Total subsidies to the renewables sector amounted to €4.6 billion in 2009, according to a study published by Deloitte late last year.
However, those subsidies have become a target to help remedy Spain’s electricity tariff deficit. The government needs to pay back utilities in the electricity sector some €16.5 billion to compensate them for the difference in regulated power tariffs and real electricity costs over the last 10 years. But the government has been having difficulty in raising money in the capital markets to fund the shortfall.
As such, investors believe the Spanish utilities bearing the working capital burden of solar PV projects have put pressure on government to address the issue, leading to the current retroactive cuts.