By Jason Deign

Spain’s CSP industry plans to fight a proposed formula for renewable energy remuneration after initial calculations show it falls far short of the promised level. The move follows the publication this month of details of the payment scale replacing feed-in tariffs (FiTs) for renewable energy.

In legislation proposed in July last year, the administration planned to replace all renewable energy FiTs with what it called a ‘reasonable return’, roughly equivalent to 7.5% over the lifetime of a project and applicable to plants already in operation.

Renewable energy associations including the Spanish CSP trade body Protermosolar argued at the time that the figure was seemingly plucked out of the air and bore no relation to the actual costs of financing projects, which had taken into account returns expected under the FiT regime.

“If you had told any of the Spanish companies that invested in CSP four or five years ago that they would be getting 7.5%, they wouldn’t have put their money in the plants,” says Protermosolar’s Dr Luis Crespo.

There was also consternation over delays in publishing the new methodology for calculating plant profits. For the last seven months, plant owners have had to continue operating as if the FiT regime were still in place, while knowing real remuneration rates would be much lower.

As Spanish Ministry for Industry, Energy and Tourism issued 1,538 pages of guidance for different types of renewable plant this month, project owners rushed to assess the damage to their balance books. Wind power and solar PV have been hardest hit.

The ‘reasonable return’ is based on the lifetime of a project, which means any plant that has already received that much or more through the FiT scheme will no longer be eligible for payments. This applies to any wind farm built before 2005, as many were.

Acciona, which owns 7.2GW of wind energy, is reported to be facing losses of €200 million a year as a result of the adjustment.

Bank loans

For PV, meanwhile, the problem is that many projects were built on the back of bank loans that have had to be refinanced at rates of up to 7% or 8%, essentially wiping out any prospect of profits.

Ikea, the furniture retailer, was one of the first high-profile casualties of the proposed FiT replacement. It handed the keys to a €65 million, 10MW PV plant in Cuenca back to its bank, Banco Santander-owned Banesto, shortly after the new calculation mechanism was published.

CSP players have yet to report an impact. But according to Crespo, what is clear from a first reading of the documents released by the ministry is that the figures do not even add up to the government’s own definition of ‘reasonable return’.

As detailed on CSP Today’s Spanish site, the exact level of return chosen by the Ministry is based on the average yield on 10-year state bonds plus 300 points, which actually comes in at 7.398%.

Furthermore, says Crespo: “The fact is that this cut comes on top of previous ones. With the numbers they have used, it’s quite small compared to others, but when you add them all up we are well below what the government considers to be a reasonable return.

“The exact amount differs from plant to plant, but right now a lot will depend on what plant owners can agree with their banks.”

Protermosolar is currently preparing a vigorous rebuttal of the government’s calculation methodology.

The ministry’s proposals are being scrutinised by Spain’s National Commission for Markets and Competition (Comisión Nacional de los Mercados y de la Competencia or CNMC in Spanish) and interested parties have 20 days from publication in order to submit their views.

Changing tack

Whether a challenge from the CNMC would force the government to change tack is very much open to question, however.

Spain’s Minister for Industry, Energy and Tourism, José Manuel Soria, is noted for having ignored the conclusions of the energy regulator before and, says Crespo: “We have already tried to reach him every way possible.”

Ministry policy, he adds, seems single-mindedly dedicated to eliminating support for renewables in the name of reducing the tariff deficit.

It looks likely, then, that the current proposals will make it into law and Spain’s beleaguered CSP industry will end up having to take its battle to the courts.

Piet Holtrop, a Barcelona-based lawyer leading appeal efforts on behalf of various Spanish renewable energy bodies, nevertheless believes European Union (EU) law will ultimately vindicate the project owners.

“There is no doubt here that the applicable law here is EU law,” he says. “Eventually the national courts will have to defer to EU courts for a preliminary ruling. I think the government is aware of it. They are just pushing the problem forwards.

“That’s how the deficit was caused in the first place.”

To respond to this article, please write to Jason Deign.