Spain’s new Prime Minister Mariano Rajoy suspended the nation’s feed in tariff subsidies for all new renewable energy projects January 27, 2012 announcing that Spain could no longer afford it given its budget deficit. There has been widespread trepidation that the FiT program would be cut, but the swift and decisive action suspending the program entirely left the renewable energy industry reeling.
As if to remove any doubt about its future, the Prime Minister went further saying the administrative machinery to support FiT would also be dismantled.
Day of rapture for renewable energy
Share prices for renewables energy companies fell hard lead by Vestas Wind Systems A/S (VWS), the biggest wind-turbine maker, with a 2.9 percent share price decline. Abengoa SA, the Spanish solar mirror engineering firm fell 2.2 percent. Iberdrola SA (IBE), the biggest renewable energy producer based fell 1.5 percent as it is more diversified across global markets.
The action did not effect “either the installations in operation, or those that are already registered” meaning all current projects are, for the time being, still receiving their subsidy payments.
The government said the suspension of the feed in tariff program would not put Spain’s contribution toward achieving the EU 20% renewable energy target by 2020 at risk, putting a good spin on a the reality that the out of control feed in tariff subsidies had produced installed renewable generating capacity and its essential gas fired combined cycle backup generation in Spain fully double the country’s peak demand.
Spain’s new government said it had to act to rein in the out of control cost of the subsidies for renewable energy projects to cut its 24 billion euros ($31 billion) budget deficit and reduce future power-system paid through the national budget. Industry Minister Jose Manuel Soria said that Spain’s energy problem had turned into a financial problem necessitating the end of the subsidy regime as power system debt increased because revenue from state- controlled prices no longer covered the cost of delivering power and the government did not want to increase electricity rates for fear it would worsen the economic conditions facing the country.
- Subsidizing Commodities Never Makes Sense (insightadvisor.wordpress.com)
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- Spain suspends clean power incentive program to reign in costs (gigaom.com)