The three main trade bodies in the Spanish photovoltaic (PV) industry announced last week that they have started their campaign in the courts to try and overturn two laws that will retroactively limit the amount of feed-in tariffs received by the country’s PV plants.
The trade bodies, which include the Asociación Empresarial Fotovoltaica (AEF), also delivered 10,000 letters from PV developers to Parliament protesting against the new laws. The more damaging of the two, Royal Decree 14/2010, proposes to retroactively limit the number of production hours that are eligible to receive the government’s feed-in tariff. This will effectively reduce tariffs received by PV plants by 30 percent, according to AEF.
However, that law has yet to be approved by Parliament and can still be passed with modifications. Spanish media, though, are predicting the Royal Decree might be approved without any changes on Wednesday. If the law goes ahead as currently planned, it is set to trigger a wave of bankruptcies starting September, when about 50,000 PV plants will have surpassed the number of production hours eligible, under the new law, to receive a feed-in tariff, trade bodies predict.
Such a reduction in tariffs would seriously impede their ability to service some €20 billion in debt provided for the sector between 2007 and 2008 alone. This could be particularly bad news for the likes of BBVA, which is said to be the biggest lender in the sector with some $3 billion in loans granted; Santander, the second-largest lender with some $2.3 billion committed; and Caja Madrid, which has lent $1.9 billion to the sector, according to data from New Energy Finance, a consultancy.
The new law intends to implement the most stringent cuts to production hours between 2011 and 2013, limiting the number of hours eligible to receive the feed-in tariff to 1,707 annual hours. This would net the government savings of some €2.2 billion over these three years. As a reference, Spanish PV plants have been getting tariffs for between 2,100 and 2,500 annual production hours, with no constraints to production under the current law.
From 2013 onwards, limits to production hours would be implemented by geography and are generally seen to be less stringent.
If approved, Royal Decree 14/2010 will join decree 1565/2010, approved late last November, which already reduces the payment period for all PV tariffs (past and future) to 25 years. This retroactive element is being targeted by PV trade bodies in their appeals to the courts, including the European Court of Justice. That law also cut feed-in tariffs for new plants by up to 45 percent.
The Spanish PV sector has become a victim of its own remarkable accomplishments, as Spain rocketed to the top of the world’s solar power producers. Its success has happened on the back of generous government subsidies that, in 2009, amounted to €2.7 billion of PV tariffs, accounting for some 43 percent of all subsidies paid to the renewables industry.