To cut or not to cut? Spanish solar feed-in tariff saga continues

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The Spanish feed-in tariff saga has moved another step towards conclusion, as the government joins solar power producers in forming an agreement for subsidy reduction and electricity price reduction, aiming at the same time to preserve the country’s renewable energy industry, reports Bloomberg.

A draft document released previously outlined talks between executives and government officials, which suggested that subsidies for plants already operating would be cut 10% to 15% over the next three years, compensated by three extra years of payments. An industry ministry spokesman has now confirmed the authenticity of this document and said the government will also seek deeper cuts.

Prime Minister Jose Luis Rodriguez Zapatero’s government wants to keep a lid on electric costs by paring back a 2007 law granting above-market prices for clean energy producers. The measures would hurt developers including Actividades de Construccion y Servicios and Abengoa.

“The details of the latest proposal don’t look as bad as the solar sector feared,” said Francesco D’Avack, industry analyst at Bloomberg New Energy Finance, London. “If the key points we’ve seen are adopted, it will be a big relief. They should prevent the great majority of projects from going under water, restore investor confidence and free up financing.”

Under the anticipated plan, operators of existing plants will receive 85% of the subsidy they already get in 2011 and 2012. In 2013, they would get 95%. These subsidies, due to run 25 years from 2007, will be extended three years beyond the current expiration date.

A further point the draft document presents is an option where developers could remain unaffected by the proposed temporary subsidy cuts by taking a cap on the number of hours their plants can earn above market prices. The industry ministry spokesman said the government is pressing to make that provision mandatory. Incentives for projects not yet built would be reduced 45% for those ground-mounted and 25% for roof-mounted.

These details were outlined in a leaked document received by Bloomberg News. The document was the basis for a meeting between government officials and industry executives on July 29; however no conclusion was made during this meeting. The final decision may run-on into September 2010 if an agreement can’t be reached by the beginning of August, an executive present at the meeting said.


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