Spain’s solar thermal electric sector challenges change in renewables legislation 13/10/2009

Spain’s solar thermal electric sector challenges change in renewables legislation 13/10/2009 The Spanish Senate approved a new law which includes a repeal of Article 4 of Royal D. Protermosolar, Spain’s solar thermal electric industry association, has declared that this change in legislation, which will be subject to ratification in the Spanish Congress on Thursday, endangers the investments made in 35 solar thermal electric plants currently under construction in Spain and thousands of jobs. The association considers that this shock move by the Spanish Senate also generates further legal uncertainties and throws the renewable energy sector in Spain into disrepute.

On Thursday of this week, the Spanish Congress will vote on whether or not to ratify a law approved by the Spanish Senate repealing Article 4 of Royal Decree (RD) 6/2009 which obliges renewable energy projects to be listed on a registry of preliminary assignation of remuneration held by the Ministry of Industry. Parliamentary sources have told Renewable Energy Magazine that it is likely that the PSOE (Spain’s socialist government) will vote in favour of the Ley de regulación de las Sociedades Anónimas Cotizadas de Inversión del Mercado Inmobiliario (a law regulating listed real estate investment companies) and therefore, it is most likely that it will be ratified and enter into effect.

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If so, the repeal will mean the end of the system of control that the Ministry of Industry established to closely oversee future renewables projects, cap new production capacity, and assign tariffs. The sector will return to being regulated by RD 661/2007, effectively clearing the way for developers to move forward with projects in the pipeline without having to wait for the publication of the registry. However, this expected change occurs only five months after RD 6/2009 was enacted and sources in the sector have told Renewable Energy Magazine that it will only bring more damaging legislative instability to the sector. Furthermore, this move comes only days after the Ministry of Industry approved the first 36 requests for inscription on this registry of 767 MW of wind power, 50 MW of concentrating solar power, 34 MW of biogas and 1 MW of cogeneration projects.

Uncertainty will prolong current hiatus in sector

The same sources consider that the elimination of the registry will lead to another period of uncertainty because nobody knows how the Ministry of Industry will react and whether or not it will impose further legislation on the renewables sector. Additionally, this change has been made without considering that the new EU Directive on Renewable Energy came into effect on 25 June, which the Spanish Government must transpose into its national law before December 2010.

In a communiqué, Protermosolar declared that: “The legal change affecting the renewable energy sector that the Ministry of Industry wants to enact through the Senate in a law regulating listed real estate investment companies and which will be subject to ratification in the Spanish Congress on Thursday, endangers the investments made in 35 solar thermal electric plants currently under construction in Spain based on legislation prevailing at the time.”

“Each plant requires an average investment of around €300 million and the manufacture of components for the plant and its construction create the equivalent of 10,000 jobs per annum. The 35 plants employ the equivalent of more than 300,000 people and require investments of €10 billion, which will be threatened if this change in legislation is approved”, it added.

According to Protermosolar, the pending amendment to the law means that only 500 MW will receive the current feed-in tariffs, while the situation of the remaining plants (1,000 MW) that were started based on firm expectations under RD 661/2007 will be uncertain. Banks and financial institutions will not accept this level of uncertainty that will have grave consequences for manufacturers, construction companies, and investors if loans are cancelled and banks demand the money they have lent be paid back. This planned change in legislation will lead to the loss of capital companies have invested in solar thermal electric projects to date and could even lead to some of them going bankrupt. Damages could exceed €5 billion and lead to a wave of pecuniary liability claims against the Spanish State.

According to Luis Crespo, Secretary General of Protermosolar, “This change will generate a great degree of legal uncertainty in Spain, since it comes off the back of three legislative changes in the last two years (the latest being the suppressive RD 6/2009 only five months ago). These changes mean that Spain will no longer be a priority market for foreign investments in renewable energies”.

In relation to the Spanish Energy General Secretariat’s declarations to the news agency EFE stating that this amendment does not represent a change in regulations, Luis Crespo says that, “they are surprising given the huge damage the amendment will cause and is evidence of the Ministry’s lack of concern that millions of Euros in investments in Spain and thousands of jobs could disappear due to the legal instability shown in our country”.

The association insists that the current situation is extremely serious and could be the death of a sector in which Spain has been a world leader, just when other nations are developing ambitious plans to boost renewable energy use. Furthermore, the association highlights that the recently enacted EU Directive on Renewable Energy means that EU Member States can now “statistically” import energy generated using renewable sources from other states in order to meet their 2020 targets if the source renewable energy projects are financed by the importing country – something which could clearly be highly beneficial to Spain’s renewables industry and the solar thermal electric sector in particular.