European Commission critical of Spanish halt to renewable energy subsidies

Spain’s decision to temporarily halt subsidies for renewable energy projects will have a ‘disturbing impact’ on investment in the sector according to the European Commission.

Brussels sees the move as unnecessarily harmful to the industry.

“The suspension of all new renewable energy projects will have a disturbing impact on investment in this sector,” the EC’s Marlene Holzner said “Reforms should be undertaken with the market players and not with such sudden stop-start approaches.”

Spain’s new conservative government halted subsidies for renewable energy projects on Jan. 27 to help curb its budget deficit and rein in power-system borrowings backed by the state that reached 24 billion euros ($31 billion) last year, reports Bloomberg.

On the basis it passed a decree stopping subsidies for new wind, solar, co-generation or waste plants not approved by that date.

The renewable plan may “help Spain toward its 1.5 billion- euro tariff deficit target for 2012” while reducing the risk that power companies suffer from a more damaging retroactive cut, Fitch Ratings said in a statement.

“This action on its own, however, will not eliminate the annual tariff deficit,” Fitch said. “Eliminating the annual deficit would be likely to require further rate increases to consumers.”

Spain is Europe’s second-largest renewables market by installed capacity with 27500 megawatts in wind and solar projects in operation. It got 20 percent of power demand last year from these plants, data from the grid operator shows.

The suspensions in a member-state facing major fiscal constraints may be temporary yet to reach 2020 renewable energy targets, reforms must be “managed carefully.” Holzner said.

“The commission hope that reforms are undertaken following best practice across Europe and strive to minimize disruption and confusion to the investors and market players who are creating the jobs and growth Europe needs so much,” the EC spokeswoman said.

The country’s three main industry associations also criticized the government’s decision.

About 3850 MW in renewable energy projects have permits to be built in the near-future with current subsidies, or 14 per cent of current capacity, data from the lobby groups shows. Of this, photovoltaic installations amount to 427 megawatts, solar thermal power plants about 1425 MWand wind projects 2000 MW.

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