Legal fight brewing in Spain over cuts to green energy subsidies

February 16, 2013 by  
Filed under Green Energy News

 AP Photo  

International renewable investors are preparing for potential legal action against the Spanish government for cutting renewable energy subsidies and other reforms in order to reign in the $37.4 billion tariff deficit in its electrical system.

’s Parliament passed a law on Thursday that cut renewable energy technology subsidies for alternative energy technologies which, coupled with other recently passed laws, have angered international investors who now find it hard to turn a profit.

“I don’t know why anyone would put another penny in investment in the sector in Spain,” one anonymous investor told Reuters, adding that the reforms could cause some highly leveraged solar power projects to go bankrupt.

Reuters reports that foreign investors argue that the actions of the Spanish government violate their their contracts and will only serve to wipe out all the profits for renewable power sources like solar, geothermal, and wind. Investors have more than $17 billion of renewable energy assets in the country.

“International investment funds are consulting with legal advisers on how to proceed with action. There will be various lawsuits,” Luis Crespo, secretary general of Spain’s solar thermal group, told Reuters.

Crespo added that investors from the U.S., Japan, and the United Arab Emirates are among those looking to pursue legal action against the Spanish government under the Energy Charter Treaty — an international energy agreement.

For the last decade, generous green energy subsidies have lured foreign investors to pump large sums of money into renewable energy projects in Spain, making it one of the premier green energy markets.

President Obama even touted Spain’s generous green energy programs as an example how such investments can grow the economy and create jobs.

However, a Spanish university study found that renewable energy investments were actually job killers, costing the economy two jobs for everyone created in the renewable sector. Furthermore, each green job created since 2000 cost $774,000.

“The loss of jobs could be greater if you account for the amount of lost industry that moves out of the country due to higher energy prices,” Gabriel Calzada, an economics professor at the King Juan Carlos University and author of the study, told Bloomberg.

Over the years, Spain also accumulated a massive power deficit because Spain has refused to pass on the full costs of the green subsidies to consumers because it would have pushed power prices “to unprecedented highs,” reports Reuters. Holding down electricity prices meant that Spain could not cover its “regulated costs including renewables premiums.”

Officials argue the reforms were necessary to eliminate the $37.4 billion tariff deficit that has piled up in the electricity system.

Spain is not the only European country feeling the budget squeeze from green energy subsidies. the German government moved to cap a green energy surcharge on Thursday to lessen the huge costs imposed on German consumers. Germany also plans to cut green subsidies by $2.42 billion.

“We need a fundamental reform of the renewable energy law, but until we get there we don’t want to make people wait and that is why there is this price cap on electricity,” said Economy Minister Philipp Rösler.

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