The Financial Times reports investors in Spain’s photovoltaic solar power industry have protested against what they say is an illegal government plan to slash subsidies by up to EUR3bn ($3.9bn) over the next three years.
The backers, including foreign private equity groups and specialist funds, are particularly outraged by the possibility that cuts will be imposed retroactively on plants built before 2008. They say this would be in breach of long-term contracts and drive many of them out of business, as well as hurting banks.
Juan Laso, president of the country’s Photovoltaic Business Association, said: “This implies bankruptcy.” Spain’s industry ministry did not comment on the accusation. It has previously said it wants to save EUR1bn a year by reducing the cost of its subsidy programme.
Spain has vigorously promoted green investments, but says the falling cost of photovoltaic cells justifies lower subsidies. Of the total 2009 alternative energy subsidies of EUR6bn, photovoltaic electricity took half, though it produces a small fraction of Spain’s electricity.
Mr Laso alleged that the government was set to issue a law by decree this week or next that would reduce the sector’s aggregate revenue by about 30 per cent from last year’s EUR2.75bn.
“It would be very bad for Spain’s reputation,” said Tom Murley, head of renewable energy at HgCapital in London. He speaks for a group of 20 non-Spanish investors from the US, UK, Denmark and elsewhere with EUR720m of equity in Spain’s photovoltaic plants – supplemented by EUR3.5bn of bank debt.
“Most of the capital is from pension funds,” he said. “We’re talking about actions that would be extremely detrimental for global pension fund money.”
A drastic subsidy cut for existing projects, he added, would also be bad for Europe’s carbon emission targets and the continent’s image as a place to invest in alternative energy. Officials from the industry and finance ministries were understood to be negotiating with photovoltaic investors.
The investors say they are willing to make some concessions to help the government save money, but say they could have to resort to the courts.