Tuesday, February 28, 2012

The Latest Legal Development in Spain's Renewable Energy Sector

Over the past five years, Spain has been a story of renewable energy boom and bust.  Spain implemented a generous feed-in tariff for renewables in 2007.  In that year, Spain’s solar/PV capacity increased five-fold, and Spain quickly became a world leader.  In 2008, Spain was host to roughly 50 percent of all global solar installations.  A similar boom occurred in wind energy development.  Over the next few years, Spain modified its feed-in tariff to be less generous and to contain a cap on new capacity.  The sector experienced some degree of bust because of regulatory uncertainty, but many installations still occurred.  By 2010, about 20% of Spain’s electricity came from wind and solar (and 20% more from hydro) (see graph below from the link above).

Spain renewables

The latest chapter of this story, Royal Decree-Law 1/2012, happened a few weeks ago. The newly elected, more conservative government ended all subsidies for new renewable energy installations effective in 2013.  The law has been justified as an austerity measure to address what is referred to in Spain as the “tariff deficit,” the difference between that the amount that utilities have to pay to acquire and deliver electricity and the amount that they are legally allowed to collect from electricity consumers. But national environmental groups and other supporters of renewables have come out strongly against the new law.  They argue that renewable energy contributes significantly to Spain’s economy and wealth – with jobs, contributions to GDP, reductions in imported energy, reductions in CO2.  In addition, Spain’s renewable sector had become a world leader, and Spain has accumulated a base of experience and knowledge that should be built upon.  They also suggest that new law goes against EU Directives 2009/28/EC and 2010/30/EU, which establish mandatory renewable energy usage targets for 2020.  And they say that the government is blaming the rise of electricity costs on renewables, but that other factors are likely to be more important and will make electricity prices continue to rise.

- Lesley McAllister


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