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Zapatero announces cuts for Solar projects

Sun 21st Nov 2010

The Government has announced cuts to subsidies for new solar-power projects, at the same time doing a U-turn on previous plans to impose cuts on existing generators after some owners threatened lawsuits.

The Minister for Insustry commented how the government will cut the above-market price to be earned by 45% for all Solar plants. For domestic solar systems the figure will be just 5%.

The revision may spare the Government from legal action by solar plant operators, who are claiming as much as 1 billion euros in damages, while leaving them with a huge financial defecit in the Spanish electricity system, which has delayed collecting about 14 billion euros of consumer bills to date.

"This is the only way the government could avoid a great controversy" commented a partner at Allen & Overy in Madrid, who represents a number of solar plant owners.

The only ammendment for current plants outlined in the brief statement by the government is for subsidies to run for 25 years as opposed to being reduced in the shorter term under the previous law.

Solar plant developers have lobbied the government for months to demand that guaranteed above-market rates for 25 years. Industry Minister Miguel Sebastian in told executives earlier this year that he intended to cut subsidies to existing plants by up to 40%, according to Photovoltaic Industry Association Chairman Javier Anta.

The government is searching for new methods to cut the cost of power for the Spanish grid so that it can reduce the financial defecit the system generates without boosting prices for consumers before the general election.

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