It’s mainly raining in Spain


July 12, 2013

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It was billed as the mother of all electrical reforms. The one that would finally do away with Spain’s pernicious ‘tariff deficit’.

But what emerged last Friday was yet another savage cut to the country’s crippled energy industry… and one that will not even cure its underlying malaise.

For those unfamiliar with the matter, the tariff deficit is the mismatch between regulated electricity prices and the costs of energy production and distribution in Spain. A detailed history of the deficit could fill a book.

In grossly simple terms, however, it was originally introduced as an apparently cunning sleight of hand to help pay for the costs of generation and distribution at a time when Spain’s economy was booming.

The expectation at the time was presumably that economic growth would allow the books to be balanced in a few years’ time.

Instead, Spain’s economy crashed and the costs contained in the deficit, which include feed-in tariffs for renewable energy, have continued to grow.

This administration and its predecessor have tried to kill the deficit monster by backtracking on promised support for green energy, among other measures.

But the actions taken have so far failed, and each new announcement has heightened the sense of desperation.

By last Friday, even the renewable industry (or what is left of it) was just calling for a root-and-branch review that would eliminate the deficit and let everyone live in peace. Alas, it was not to be.

In the plans unveiled by the Secretary of State for Energy, Alberto Nadal, the country’s five big utilities, including international wind energy darling Iberdrola, were hardest hit.

Spain’s recession-hit consumers, meanwhile, were told to brace themselves for further electricity price rises. But a deal to get Revenue help in paying off the deficit fell through, leaving the monster alive and kicking.

Reuters reported the deficit will rise by up to €3bn by the end of this year.

It all amounts to is a truly gloomy outlook for the wind industry in Spain… and a situation other countries would do well to learn from.

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