The government owes the utilities something in the order of €25 billion. It's called the tariff deficit because legally in the future they're supposed to increase their tariffs to consumers, to repay that amount to utilities." He adds: "It is simply unsustainable for Spain to continue to build new power generation capacity without doing something to eliminate the tariff deficit.
The government owes the utilities something in the order of €25 billion. It's called the tariff deficit because legally in the future they're supposed to increase their tariffs to consumers, to repay that amount to utilities." He adds: "It is simply unsustainable for Spain to continue to build new power generation capacity without doing something to eliminate the tariff deficit.
The Spanish government has called time on renewable energy with a law suspending feed-in tariffs for new projects from 2013. What is the likely impact on the renewable energy goliath's wind energy sector?
Barcelona -- There is a lot of energy in El Hierro. Apart from the fact that an underwater volcano is erupting 2 km south of the smallest and most south-westerly of Spain's Canary Islands, work is also underway on a project to turn it into the first fully renewable-energy powered island on earth.
The Gorona del Viento project will use five Enercon E-70 2.3 MW turbines to deliver 11.5 MW of energy to the island population and to a pumping station that carries water to the upper of two lagoons connected by a hydro power plant, for use …
The Spanish government has called time on renewable energy with a law suspending feed-in tariffs for new projects from 2013. What is the likely impact on the renewable energy goliath's wind energy sector?
Barcelona -- There is a lot of energy in El Hierro. Apart from the fact that an underwater volcano is erupting 2 km south of the smallest and most south-westerly of Spain's Canary Islands, work is also underway on a project to turn it into the first fully renewable-energy powered island on earth.
The Gorona del Viento project will use five Enercon E-70 2.3 MW turbines to deliver 11.5 MW of energy to the island population and to a pumping station that carries water to the upper of two lagoons connected by a hydro power plant, for use when the wind drops.
The project is a feather in the cap of Spain's renewable energy industry, which itself is a world leader, contributing to around 30% of the country's power use a year. But outside the Canary Islands, the sector has just taken a hit.
Slamming on the brakes
Last month the recently elected People's Party (Partido Popular, or PP) passed a Royal Decree indefinitely halting all subsidies for new renewable energy projects after the current inscription period runs, in 2013.
Only the Canary Islands, home to new Industry Minister José Manuel Soria, have been exempted from the decree.
This is just the latest in a long line of setbacks that the Spanish renewable energy sector has suffered, leading Industry Ministry spokesperson Emilio Jarillo Ibañez to downplay its impact.
"It is an ‘official' moratorium, although in fact there was already a real moratorium in place because a lack of funding for developers," he says. "We have not banned renewables. We have just temporarily suspended the incentive system."
The government contends the measure will not affect the jobs of those currently engaged in renewable power generation because the law only applies to new projects after 2013.
Regarding manufacturers, Jarillo admits: "That's another matter. But I get the feeling they had already scaled down in recent years without the need for a Royal Decree, and the more efficient industries had some time ago focused their production with a view to serving other markets."
Not everyone agrees, of course. Javier García Breva, of the Spanish Renewables Foundation, has accused the government of wiping out a potential 300,000 jobs and €62 billion in investment.
The wind industry, which in the last year has provided more than 16% of Spain's energy, will naturally be among those most affected.
Overdue repairs
In 2011 the Spanish wind market recorded its lowest-ever growth, at just 5.1%, with manufacturers having to export more than 90% of production to foreign markets, according to industry body the Asociación Empresarial Eólica (AEE).
And more than half of the 1,903 MW of new wind power registered to come online before 2013 will not meet the deadline for "reasons not attributable to the promoters," said the association in a press statement.
The autonomous community of Catalunya is a case in point. Its plans for designated zones supplying 800 MW of wind power, which had been delayed because of a legal challenge over environmental impact, will now have to be put on hold indefinitely.
Some observers feel the moratorium on new renewable projects is needed to give the government a breathing space to fix Spain's patently unsustainable energy framework, though.
"Fundamentally the Spanish electric system costs €5 billion to €6 billion a year more to run than they collect from consumers and this has been the case for many years," says Tom Murley of HgCapital, an investment house active in the Spanish renewable market.
"The result? The government owes the utilities something in the order of €25 billion. It's called the tariff deficit because legally in the future they're supposed to increase their tariffs to consumers, to repay that amount to utilities."
He adds: "It is simply unsustainable for Spain to continue to build new power generation capacity without doing something to eliminate the tariff deficit. For there to be a long-term industry in Spain, which there will be, they had to do something.
"This gives me renewed confidence that Spain is going to do something that makes sense."
If Murley is right and this is indeed the first step in a process aimed at mending Spain's broken energy system, then the next act should be interesting to watch as it will probably involve taking measures that are unpopular with the country's powerful utilities.
Another scenario, voiced by many in the renewable energy sector, is that Soria is already in thrall to the electricity giants, which have been gunning for green power in recent months.
Heikki Willstedt Mesa, energy policy director at the AEE, does not think this is the case. "The current government has realised the tariff deficit is out of control," he says.
"What has left us a bit perplexed is that we have been included when wind's contribution to the deficit is minimal and our contribution in terms of economic activity and jobs is so great."
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