New alternative energy subsidies cut

 

A Royal Decree passed on 27th January, has cut financial incentives for all new ‘alternative' electricity production facilities using co-generation, renewable energy and residual waste. It also freezes subsidies for existing facilities.

As such any new project will no longer benefit from the special subsidised feed-in tariffs, and other benefits which were allowed under the Royal Decree.

These cuts, however will not apply to facilities currently operational, or listed in the remuneration pre-assignment registry as provided under Royal Decree-Law

The pre-assignment system has now been put on hold and all applications have been frozen, including those applications for pre-assignment of Photovoltaic plants under the quarterly quota auctions planned for 2012. The owners of non-registered projects which have posted the bank guarantees required to obtain a grid connection, or those required for the registration of pre-assigned facilities, can claim for the return of their outlay.

However, the new regulations allow for the Government to re-introduce economic incentives in the future, following consideration of the following factors :

Installed capacity; Level of tension of the electricity output; Contribution to the enhancement of the environment (CO2 reduction); Primary energy savings; Energy efficiency; Economically justifiable production of useful heat; Investment and operation cost; Type or primary energy used; Reasonable rate of return compared to capital market cost

The new decree intends to promote market competitiveness, using a model similar to other EU members and will mean that the plans of many investors, promoters, equipment manufacturers and engineering companies will need to be revised.

Whilst this measure had been anticipated by the sector, the decision to cut wind energy subsidies was unexpected.