Spain plans to tax the Sun

SPAIN IS a forerunner in the renewable energy industry, but reformed legislation now threatens to curb solar growth putting the small-scale photovoltaic market at risk. New measures could create major headaches for several Spanish banks. Solar energy groups claim that the subsidy reductions could force solar energy companies into default.

In the wake of the 2008 financial crisis, the Spanish government drastically cut its subsidies for solar power, and now in an unprecedented move wants to make consumers pay for the electricity that they generate and use themselves, a move unheard of in any other country.

The reforms aim to raise money for combating a €26 billion government debt to utility companies which has built up over the years in regulating energy costs and prices. With Spain in economic crisis, power consumption is falling but the energy debt will continue growing by €4-5 billion a year unless the government takes action.

The government announced a new "support levy" on solar power. The solar levy is fixed at 6 cents per kilowatt-hour. Private individuals who fail to hook their solar panels up to the national grid to be metered and taxed could face fines of up to €30 million under the new law.

US business and finance magazine Forbes pulled no punches in an article titled, "Out of ideas and in debt, Spain sets sights on taxing the sun". The article took an incredulous tone and noted: "Spain is now attempting to scale back the use of solar panels – the use of which they have encouraged and subsidized over the last decade – by imposing a tax on those who use the panels."

Inaki Alonso, an architect who specializes in ecological projects, calculated the cost of generating his own power under the new energy law and decided the numbers no longer add up. Two weeks after the government slapped the series of levies on green energy, Alonso hired two workmen to remove the solar panels he had put on his roof only six months earlier.

Neither was it possible to leave the panels on his Madrid home without connecting them to the grid; that would risk an astronomical fine. "The new law makes it unviable to produce my own clean energy," Alonso said.

Moreover, the law does not allow homeowners to sell electricity back to the grid. In 2004 the government removed economic barriers for the connection of renewable energy technologies to the grid for large-scale solar thermal and photovoltaic plants and guaranteed feed-in tariffs. Spain ended up with a huge surplus of electricity whereby the total capacity exceeds peak demand by more than 60 percent, and owing utility companies for decade-long subsidizations for selling electricity at less than cost to its customers.

In the end, Alonso moved his solar panels to a friend's house deep in the Spanish countryside. This was far enough from the nearest mains supply to be exempt from the stipulation that panels must be hitched up to the grid.

Source: Reuters, Forbes, Bloomberg