Spain May Cut Rates Behind $24 Billion Solar Boom (Update3)
April 21 (Bloomberg) -- Spain, after spurring more than 18 billion euros ($24 billion) in solar-power projects since 2008 with subsidized prices, may reduce the premium rates that attracted clean-energy investors.
The government has the authority to cut prices under a 2007 law for renewable-power plants in operation, according to an industry ministry spokesman who declined to be identified. All options are being assessed for a new strategic plan this year, he said. Spanish solar and wind developer shares fell as much as 5.1 percent.
“This is nothing less than a catastrophe” for investors, said Stephane Aderca, an energy analyst at Liberum Capital Ltd. in London. “We had believed that a promise is a promise. Going back on a promise brings the whole thing into question.”
Developers built 2.5 gigawatts of photovoltaic capacity in Spain in 2008, more than the whole world added in 2007, after the government set rates at about 10 times higher than earned by plants burning fossil fuels. Investment slumped in 2009 after Spain slashed its tariff for new plants by about 25 percent.
Industry groups have been negotiating with the government for months over tariff cuts for plants that have yet to begin production.
“Should the government incorporate a back-dated tariff revision that goes against the spirit of the law it would lead to a flood of lawsuits and would affect the credibility of Spain,” said Tomas Diaz, a spokesman for the Spanish Photovoltaic Industry Association.
Abengoa, Iberdrola Decline
The government is also considering further tariff cuts for new renewable-power plants, the ministry spokesman said in a telephone interview today.
Spanish companies that own or develop clean-energy plants declined in Madrid trading.
Abengoa SA fell as much as 5.1 percent and traded at 20.22, down 4.2 percent, as of 2:39 p.m. local time. Acciona SA dropped as much as 3.9 percent, while Iberdrola Renovables SA and its parent, Iberdrola SA, respectively fell as much as 4.1 percent and 1.8 percent. Those companies are most at risk, according to a note Credit Agricole Cheuvreux sent today to clients.
The 88-member WilderHill New Energy Global Innovation Index lost no more than 0.4 percent.
“The tariff scheme is set out in a Spanish statute so it seems unlikely they would go back and retroactively apply a new tariff,” Olivia Peters, an analyst at MF Global U.K. Ltd. in London said. “The government would be opening a can of worms.”
An Iberdrola spokeswoman in Madrid declined to comment. Officials at Abengoa and Acciona weren´t immediately available to comment. Solaria didn’t respond to a phone call and e-mail seeking comment about whether the government would act against existing plants.
“This will totally alter the perspective of project developers,” Aderca said.
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