The tax would be set at 11% of turnover from generation by new and old installations alike. Plans for the tax were leaked in mid-July and form part of an energy-sector reform law to be put before parliament by the end of that month. The tax would vary according to generating technology and would be in addition to existing business taxes on producers.
Generation from solar thermoelectric and photovoltaic power would be taxed at 13% and 19% respectively. That compares to a proposed rate of just 4% for power from nuclear, hydro and fossil-fuel generation.
Rocio Sicre, president of trade body Asociacion Empresarial Eolica (AEE) promised to fight the arbitrary measure with all available legal means. The government has steadfastly declined to negotiate with the sector or respond to questions on the tax.
AEE calculates the 11% tax would cost the sector around EUR400 million annually, reducing overall wind farm profits by about 30%. Operators of 2.5-3GW, or 11-14% of Spain's 22GW of installed wind capacity would default on project finance, the association estimated.
AEE claims the tax will claw back renewables subsidies without the government taking the legally perilous course of retroactive cuts to the state-guaranteed incentives. Yet an arbitrary tax that discriminates between technologies is also legally dubious, said Sicre.
Despite the lack of negotiations with AEE, there is little doubt the leaked plans reflect the government's true intentions, she added. Industry minister Jose Manuel Soria had already announced on 11 July that a generation tax had been drafted to tackle the EUR24 billion deficit across the electricity sector. That deficit is due to different governments setting national electricity consumer prices below cost for over a decade as an anti-inflationary measure.
Without the planned taxation, claimed Soria, consumer electricity prices would have to soar 80% in order to avoid reaching a deficit of EUR50 billion in four or five years' time. The electricity deficit is among top government priorities following the EUR100 billion bailout Spain negotiated with EU members in June.
But Sicre cites three reports from consultancy Deloitte between 2007 and 2009 that show how Spanish wind pumps much more back into the economy than it takes in subsidies, through jobs and local taxes and by offsetting fossil fuel imports and CO2 emission rights.
Levies imposed by regional governments on installed wind capacity in recent years have already made wind one of Spain's most taxed sectors, she said. And a 2009 government regulation freezing all new wind capacity after the end of 2012 has cost the sector around 14,000 jobs. The tax would be the last straw, Sicre complained.
The proposed tax has attracted heavy criticism internationally. Peter Sweatman from consultancy Climate Strategy said together with the moratorium, the tax would cause Spain's remaining industry to leech away to foreign shores. "This is a great shame as Spain's wind industry is a global leader and has delivered more to the Spanish economy over the years than many less strategic segments," he added.
The tax would seriously prejudice Spain's credibility in the eyes of foreign investors, according to a statement by a group of international investors in Spain, which includes HgCapital, Ampere Equity Fund and Riverstone Holdings.