Spanish Senate overturns retroactive solar cuts

But Spain’s lower house of parliament is unlikely to ratify the changes approved by the Senate next week, leaving trade bodies and investors to keep fighting retroactive cuts in the courts.

The Spanish photovoltaic (PV) sector has won a small victory after Spain’s upper house of parliament, known as the Senate, approved an amendment that effectively cancels recent retroactive cuts to solar subsidies.
 
However, while the Senate has been able to insert the amendment in a forthcoming law on sustainable economic growth, that law still has to be ratified by the country’s lower house of Parliament on March 10. The latter originally approved Royal Decree 14/2010, which retroactively reduces solar subsidies, and is not expected to ratify the changes proposed by the Senate.
 
Royal Decree 14/2010 works by retroactively limiting the number of production hours eligible to receive the government’s feed-in tariffs, translating into cuts of up to 30 percent to the tariffs received by the country’s PV plants.
 
It was approved late last year to howls of protests from PV trade bodies, solar investors, some Spanish regional authorities and the European Commission. At press time, the regional authorities of Extremadura, Murcia, Navarra and Valencia have appealed to the courts against the decree, arguing it is unconstitutional. They are also warning that potential indemnity payments to PV producers may neuter 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”. And trade bodies, like Spain’s Asociacion Empresarial Fotovoltaica, have vowed to fight the retroactive cuts all the way to Spain’s Supreme Court and, if necessary, to the European Court of Justice.
 
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.