A trade body of Spanish wind producers – AEE – has filed a lawsuit with Spain's Supreme Court over the government's latest round of retroactive cuts to the renewables sector and regulated transmission assets.
AEE is arguing that the government's February decision to scrap the premiums paid for renewable electricity generation – which it estimates will affect 90 percent of Spanish wind farms – as well as changes made to the inflation measure used to calculate sector tariffs are unconstitutional and “severely damaging” to the sector.
According to the trade body, some 70 percent of Spain's wind farms are project financed and many will be at risk of defaulting on their loans due to the retroactive cuts introduced by Royal Decree 2/2013.
As previously reported, up until the new law, renewable generation facilities that chose to sell the electricity they generated in the market were paid a premium in euro cents per kilowatt hour. That premium has now been eliminated, in a move that could save the government between €220 million and €500 million per year, said ratings agency Fitch, adding that “the final amount will largely depend on the volatility of the pool prices”.
The second major retroactive change implemented by Royal Decree 2/2013 is that feed-in tariffs are now calculated “using as a reference the CPI at a constant tax rate, not including either unprocessed foods or energy products,” law firm Clifford Chance wrote in a note.
“This seeks to decouple the feed-in tariffs in the electricity system from the volatility of food, oil prices and the increase in indirect taxes suffered recently (general value-added tax has increased from 18 percent to 21 percent),” Fitch explains. The ratings agency expects the government to save around €340 million per year with this change.
It's not only wind producers that will be hit by the retroactive changes. Spain's beleaguered solar sector – most of it also funded on a project finance basis – will also be affected, with Fitch warning that “some highly geared solar projects [could face] financial distress because they have been funded on a project finance basis with future earnings projections that are no longer valid”.
Spain’s UNE, a solar trade body, warns the latest changes might trigger a wave of bankruptcies across the sector.
“Currently, the vast majority of electricity-producing solar photovoltaic plants do not generate enough revenues to service their debt, neither will they be able to generate enough revenues in the future, if the current situation continues,” it said.
The industry body warns that investors in solar might see earnings decrease by up to €9.5 billion, or about 30 percent, from 2010 to 2020 due to the various retroactive cuts imposed by the government.
Previously, the Spanish government had imposed a retroactive reduction to the number of applicable hours through which solar PV plants might qualify for the country’s feed-in tariff.