The Pain In Spain as Green Energy Policy Fails
by Ian Thorpe
26 November 2011
Earlier this year (April 30 - Bloomberg) it was reported that Spain is lancing an 18 billion-euro ($24 billion) investment bubble in the solar energy business that has boosted public liabilities for the already heavily indebted national economy, by spoon feeding money to sun farm operators for all the electricity their solar panels generate overnight.As most of other operators were conveniently based offshore this policy also had the effect of depriving other new infrastructure and development projects and hamstrung the Spanish government as it tried to cut power costs and reliance on coal and oil imports, and to insulate Spain from the crisis in the Eurozone as Greece’s debt crisis spread.
As the then Industry Minister Miguel Sebastian was negotiating reductions in subsidies for solar plants that would curb energy costs Grupo T-Solar Global SA, the world’s biggest photovoltaic plant owner, shelved its Spanish stock offering while competitor Solar Opportunities SL cancelled a 130 million-euro deal to build new solar plans..
“They’ve put the fear of god into all green energy investors,” said Paul Turney, chief executive officer of Madrid-based Solar Opportunities. “By the time they’ve finished dithering around, they’ll have hurt their credibility so badly that no one will want to invest.” It is a typically self interested comment from the head or a corporation set up to profit by milking dry Spanish taxpayers.
Spain has for some years been battling on several fronts to revive its economy and convince government bond traders it can avoid getting dragged into a Greek-style debt spiral after Standard & Poor’s cut its credit rating in April. Solar-plant owners including General Electric Co. earn about 12 times what’s paid for power from fossil fuels. Most of that is a government subsidy which is passed on to customers in their domestic electricity bills.
Spain’s government, then led by Prime Minister Jose Luis Rodriguez Zapatero last cut solar rates in 2008, hitting plants not built at the time. Recently the government has been implementing reductions in what leaders have called ‘Excessive Subsidy for the thousands of installations already making power from the sun, wind and biomass.
“This is necessary,” said Leon Benelbas, chairman of Atlas Capital Close Brothers investment bank in Madrid. “It’s an excessive subsidy at a time Spain has to gain competitiveness, and the cost of energy is a determining factor in international trade.”
Spain’s fixed-price system for renewable power, which attracted more investment in solar panels in 2008 than the rest of the world put together, boosts the state’s liabilities even though they don’t show up on its balance sheet. This is because the Spanish system delays payments by consumers for part of their electric bills for years. The government guarantees repayment to power suppliers such as Endesa SA and Gas Natural SDG SA. The cost of those unpaid bills rose last year by about 4 billion euros to 16 billion euros.
Spain intends to revise the clean-energy rates down “to avoid damaging the competitiveness of industry,” Sebastian told the Spanish parliament yesterday.
Renewable-power generators will receive 6.3 billion euros in subsidies this year compared with 5 billion euros in 2009, and they may get more than 126 billion euros in subsidies over the next 25 years under the existing tariff regime, the Industry Ministry said in a report published by Expansion newspaper on its website today.
The fixed-price system has created a “bubble” in photovoltaic power because the government didn’t initially fix limits to the number of plants that could claim subsidized prices, the report said.
“We had a gold rush here,” said Turney who, based on current power rates, planned to invest 240 million euros of equity into Spanish solar plants by next year. “They were building plant like crazy.”
Instead, the Solar Opportunities executive called off a deal with 30 million euros in equity and 100 million euros of debt that was set to be signed earlier in the year . He said other planned projects may have to be cancelled too.
Groups such as the Spanish Photovoltaic Industry Association say they’re willing to accept cuts for future plants. They argue that reducing the price for existing facilities will breach their agreements with the government and damage the country’s reputation with investors.
“No sensible government is going to do this,” Juan Domingo Ortega, co-owner of Renovalia Energy SA, said at an April 23 outlining the company’s plan to raise 153 million euros in a stock offering. Renovalia is set to begin trading May 12.
Shares of solar producer Abengoa SA lost 8.9 percent this week. Solaria Energia y Medio Ambiente SA dropped 8.8 percent.
Forcing solar investors to take a haircut increases risks of doing business with Spain’s government, which may damage its ability to sell bonds, said Juan Laso, president of the Photovoltaic Business Association and T-Solar’s chief executive.
“The consequences of this are enormous, not just for the companies and financial institutions that have invested their money, but for the credibility of the country,” Laso said.
Investors began questioning the strength of Spanish assets as the shockwaves from Greece’s financial meltdown spill across Europe. The extra yield investors demand to hold Spanish 10-year government bonds reached 113 basis points this week, the widest spread in more than a year as the scale of the bail-out needed by Greece ballooned.
The legal dispute on Spanish solar rates turns on a reading of the 2007 law that governs renewable-power production. The government says it gives it the right to revise prices for existing plants this year. Executives say their prices are guaranteed for 25 years.
“In renewable energy, often government incentive programs are a key factor in our decision,” said Andrew Katell, a spokesman for GE Energy Financial Services. “We would take the same approach in Spain.”
GE Capital’s energy investment unit has 32 percent of Fotowatio Renewable Futures, which owns 90 megawatts of solar generating capacity in Spain.
“Those who thought it was a government guarantee hadn’t done their homework,” said Benelbas of Atlas Capital. He said investors will welcome the price cuts because it curbs the state’s financial exposure. “It’s all connected
A leaked internal assessment produced by Spain’s Zapatero administration revealed the extent of the failure in Spain's Green economy. The assessment confirms the key charges previously made by non-governmental Spanish experts in a damning report exposing the catastrophic economic failure of Spain’s “green economy” initiatives.
On eight separate occasions, President Barack Obama has referred to the “green economy” policies enacted by Spain as being the model for what he envisioned for America.
Later came the revelation that Obama administration senior Energy Department official Cathy Zoi — someone with serious publicized conflict of interest issues — demanded an urgent U.S. response to the damaging report from the non-governmental Spanish experts so as to protect the Obama administration’s plans.
More recently, U.S. senators have introduced the vehicle for replicating Spain’s unfolding economic meltdown here, in the form of the “American Power Act.” For reasons that are obvious upon scrutiny, it should instead be called the American Power Grab Act.
But, most damaging to the Marxism by stealth movement, another leaked document reveals that before it was thrown out this month even the socialist Spanish government acknowledged the ruinous effects of its green economic policies.
Unsurprisingly for a governmental take on a flagship program, the report takes pains to minimize the extent of the economic harm. Yet despite the soft-pedaling, the document reveals exactly why electricity rates “necessarily skyrocketed” in Spain, as did the public debt needed to underwrite the disaster. This internal assessment preceded the Zapatero administration’s recent acknowledgement that the “green economy” stunt must be abandoned, lest the experiment risk Spain becoming Greece.
The government report does not expressly confirm the highest-profile finding of the non-governmental report: that Spain’s “green economy” program cost the country 2.2 jobs for every job “created” by the state. However, the figures published in the government document indicate they arrived at a job-loss number even worse than the 2.2 figure from the independent study.
This document is not a public report. Spanish media has referred to its existence in recent weeks though, while Bloomberg and the Washington Examiner have noted the impact: Spain is now forced to jettison its plans — Obama’s model — for a “green economy.”
Remarkably, these items have received virtually no mainstream media attention either in Britain where the crypto - socialist coalition government is charging ahead with plans to shut down all our coal, oil and nuclear electricity plants and make us dependent on wind.
An item which has been covered widely, however, is that President Obama along with the UK Government, the EU Central Bank and the IMF are now pressuring Spain to turn off its spigot of public debt in the name of averting a situation similar to that of Greece.
Also covered widely a re David Cameron and Nick Clegg's efforts to persuade an increasingly sceptical British electorate that the future is green and Obama’s promotion of the American Power Act — the legislation which would replicate Spain’s current situation in the United States.
Put simply, Obama, the UK Coalition and the European Union are currently promoting a policy which are based on a policy that they wishe to see Spain abandon. (Welcome to Obamaland, the labyrinth of European policy and the slightly surreal, Pythonesque comedy show of the Coalition.) The particulars of the Obama administration's proposals are explained in a fashion grandly more illuminating than this article has the time or inclination to aim for, in Power Grab: How Obama’s Green Policies Will Steal Your Freedom and Bankrupt America. US Liberals will claim this link is invalid because the book and article linked to are by conservative writers. Unfortunately the US left is so bigoted that on left leaning websites and media sites it is still hard to find one single word critical of Obama and his policies or even presenting an objective or balanced analysis of his policies of style of governing. For the US left or "liberals" as they hypocritically like to style themselves it is still fawning, sycophantic, skunk - felching outright worship all the way, the only criticism are for not being Marxist or authoritarian enough or for not suspending democratic government and ruling by decree when The House of Representatives blocks parts of his profoundly unpopular program.
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KEYWORDS: green environment, energy, power, electricity, photovoltaic, wind, turbine, spain, america, obama, subsidy, cost
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