Renewable Energy Policy of Spain

Spain was one of the best producers of solar energy in 2002, and it was the center of attraction for renewable energy investors, as it was listed in the top 10 for a certain time ago and is now fully separated from the 10 countries in renewable energy rankings. This ranking has been declining since the regulatory arrangements that led to the halt of FiT implementation in 2013. In October 2017, Ernst & Young's report on 'renewable energy country attractivenes index' listed Spain in 27th place just after Pakistan and Sweden. Sara Pizzinato, the former Managing Director of the Fundacion Renovables, said that it means that Spain is no longer attracting renewable energy investments. How accurate is this today?

What happened in 2007?

The Spanish government has turned its target to the private investors to meet renewable energy targets set by the European Union. Securing investments with subsidies made it easier for 62,000 people to invest their capital in solar energy projects. Having siad that, the photovoltaic (PV) capacity of Spain rose to 3.5 gigawatts. Total subsidies for solar energy rose by 190 million € to 3.5 billion € in 2007.

Local investors were seriously affected

418 investors who put their money in a solar power plant in Paraje La Jeresa de Lorca in the Murcia region stopped repaying the loans they had agreed with the banks to finance the investment.

Until that time, the only offer for the banks was to refinance the loan. This meant that now the solar energy facilities did not go beyond their lifespan and that they would have to double the four percent interest rates they have now paid. The Ministry of Industry refused to comment on how many investors were concerned and whether they wanted to help them. Given this fact, in the Northern Navarre region, about 9,000 people had got into severe situations because of this. There was a number of criticism here that it was a very serious mistake to estimate the necessary solar power, and that there was no agreement on any limitations on the subsidized MW which already was a small amount. When subsidies were cut between 2007 and 2010, state-financed solar energy capacity increased five-fold to 3.7 GWh (CNE), according to the National Energy Commission (Comisión Nacional de Energía). According to Manuel Pérez, who is a both owner of a co-operative in Crevillente in Alicante and one of 500 households investing 80 million € in a 13.5 kW power plant, 'mounting' became the biggest problem at that time. 80 million €, saving 16 million, while the rest were loaned by the banks (Viúdez, J., 2013). 

How did these cuts to Spain's renewable energy subsidies affect the foreign direct investment?

In May 2017, the Spanish government lost its first international arbitration process on disruptions to renewable energy subsidies. The International Center for Settlement of Investment Disputes (ICSID) awarded in favor of the Eiser Infrastructure Limited of British Government and its affiliate Energía Solar Luxembourg, and found that the Spanish government had violated Article 10 of the Energy Charter Treaty (ECT) and that the company is deprived from fair and equitable proceeding. This situation affected foreign investors whom were no longer sure about the rules in 2013. This made it difficult to plan new projects and eventually invest in them (IRENA, 2013).

Current situation in Spain

Almost no renewable energy capacity could be established after 2011, when subsidies were seriously reduced and retrospective tariff reductions were implemented on existing projects (EY, 2017).

Despite all of this, companies can develop a renewable energy project that of economically sustainable, not requiring government subsidies and selling electricity generation at current market prices, and delivering higher returns than traditional electricity generation, without the security and the political disadvantages. According to the number of authorities, the new regulation of the electricity sector has introduced a new economic model for renewable energy production. It is stated that the model is sustainable, competitive and more reliable in terms of not having a tariff guarantee and due to the fact that, it is now more foreseeable in order to realize a project.

References:

- Ernst & Young, 2017.
- The Comisión Nacional de la Energía of Spain (CNE).
- IRENA-GWEC: 30 YEARS OF POLICIES FOR WIND ENERGY, 2013.
- The Solar Union of Spain (UNEF). 
- Viúdez, J. El Pais, (6 May 2013).
- (2nd photo credit: Keith-Harkins-Siemens-solar-South)

Note: This article will be published as a paper in the forthcoming days.