Preliminary Research on Spain
In an attempt to focus my research and better manage my time and interviews, I have started my research in Spain by defining the questions I seek to answer. Below is one question and the preliminary research I have done to answer the question.
What is the history of the policies, and why did they prove to be so ineffective?
From the research that I have done so far (two articles), the government deficit on electricity spending, now at €26 billion, lies at the heart of the problems in renewable energy. Utilities are only legally allowed to raise electricity prices by a certain amount and over the past 15 years the cost increases have exceeded the legal limit. The remaining costs above the legal limit have been put on the government balance sheet.
The high cost of natural gas has been a contributor to the increase in the electricity deficit, but so has the initially lavish FIT. The FIT in Spain was initially greater that the German FIT even though Spain has much more sun. The combination of the generous FIT with a poorly regulated electricity market eventually proved to be too much for the Spanish government. Toby Couture is Director of Renewable Energy at IFOK GmbH put it very well when he said, "Spain tried to have it both ways: it set out to transform its electricity system, but failed to establish a credible mechanism to pay for it." [1]
What is the history of the policies, and why did they prove to be so ineffective?
From the research that I have done so far (two articles), the government deficit on electricity spending, now at €26 billion, lies at the heart of the problems in renewable energy. Utilities are only legally allowed to raise electricity prices by a certain amount and over the past 15 years the cost increases have exceeded the legal limit. The remaining costs above the legal limit have been put on the government balance sheet.
The high cost of natural gas has been a contributor to the increase in the electricity deficit, but so has the initially lavish FIT. The FIT in Spain was initially greater that the German FIT even though Spain has much more sun. The combination of the generous FIT with a poorly regulated electricity market eventually proved to be too much for the Spanish government. Toby Couture is Director of Renewable Energy at IFOK GmbH put it very well when he said, "Spain tried to have it both ways: it set out to transform its electricity system, but failed to establish a credible mechanism to pay for it." [1]
Unlike other renewable energy policy mechanisms, such as the FIT in Germany, the Spanish government holds part of the liability for the FIT payments. In Germany, the entire cost of the FIT is placed onto the customers through charges on their electricity bills; however, because of limit on the increase in electricity prices, the Spanish government hold part of the responsibility for the FIT. This made things all the worse when the financial crisis hit Spain and the government needed to reduce its liabilities. To do so, the Spanish dramatically cut the FIT, but as it has continued to struggle under the weight of austerity, it has been necessary for the government to retroactively change the renewable energy policies. The FIT is a 20 year agreement to purchase renewable electricity at a particular price, so this represents a long term liability on the government balance sheet.
The table below provides a list of the retroactive policies that have crippled the Spanish Renewable energy industry.
Sources
[1] The Lesson in Renewable Energy Development from Spain
[2] Pain in Spain: New Retroactive Changes Hinder RE
The table below provides a list of the retroactive policies that have crippled the Spanish Renewable energy industry.
 |
| A history of retroactive RE policies in Spain. [2] |
Sources
[1] The Lesson in Renewable Energy Development from Spain
[2] Pain in Spain: New Retroactive Changes Hinder RE
