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May 27, 2017

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Spanish downturn a disaster for green energy

MADRID--Spain's wind turbine manufacturers are laying off workers and farmers who installed solar panels are facing ruin as austerity policies afflict the long-coddled green energy sector.

Further cuts are expected this summer.

State subsidies to clean energy producers have already fallen by between 12 and 40 percent on average in recent years, industry analysts say.

They could fall by another 10-20 percent in a new energy sector reform expected mid-July, according to the Spanish media.

"The punishment meted out to renewable energies in the past five years amounts to more than 6 billion euros (US$8 billion)," said Sergio Otto, secretary general of the business group Renewables Foundation.

"In the wind turbine industry alone we have lost 20,000 jobs and in the solar energy sector it's probably more," he said.

At the heart of the problem is a deficit of more than 26 billion euros in Spain's energy market, built up by subsidies to cover the gap between the cost of producing electricity and the price charged to consumers.

"We are still singling out renewable energies as the main guilty parties for this deficit," Otto complained.

In the middle of the last decade when the economy was enjoying strong growth, Spain put a cap on the price of green energies and provided "fairly generous" subsidies, said Carlos Garcia Suarez, expert in the sector at the IE Business School.

From Boom to Collapse

The state aid boosted the appetite of investors and led to a "boom" in wind and, later, solar energies, making Spain a world leader in the industry, Suarez said.

"Not only have the subsidies come down but new projects have been explicitly banned, which is pretty unusual," he said.

The retroactive nature of some cuts even threw into question Spain's reliability for investors, Suarez said.

Indeed, several investment funds that bet on the sector are now taking Spain to international arbitration.

There is "political pressure," too, from the United States where some of the funds are based and the Spanish government is uncertain how to resolve the matter, he said.

"We gave excessive subsidies," said Rodrigo Izurzun, energy specialist at Ecologists in Action, an association which also criticized the radical change in policy since the economic crisis hit Spain in 2008.

"The current policy is harmful because the sector was maturing and close to becoming competitive without any aid but has suddenly totally collapsed," Izurzun said.

"That is without mentioning what the impact is in terms of braking the fight against climate change."

Investors in wind turbines no longer believe the outlook is attractive, said Heikki Willstedt Mesa, director of energy policy at the wind turbine association AEE.

"We have sued in the Spanish courts," said Miguel Angel Martinez-Aroca, president of Anpier, which groups Spanish solar energy producers. The sector is "barely surviving after so many cuts," he said.

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