Energy reform bill less bitter than feared

SPAIN: Spain's ailing wind sector admits the central government's energy reform bill, approved by cabinet on 14 September, to be less harsh than expected.

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An earlier draft in July proposed a new tax on electricity generation turnover set at 11% for wind and 21% for solar PV, compared to 4% for conventional power. Bowing to threats of legal action for discrimination, the government now proposes a 6% rate for all electricity generation technologies.

Reflecting the sector's tempered relief, the share price of listed wind operators, such as Acciona, Iberdrola and Gas Natural, hiked 2.5%-4% by the close of trading on 14 September.

But the bill, drafted without consulting the wind sector is not good news, said a spokesman for national wind association Asociacion Empresarial Eolica (AEE). "It's simply less awful news," he said.

Wind is already the most heavily taxed generating technology "and now the production incentives that attracted investors will be partially clawed back retroactively", argued AEE. The association calculates the tax from Spain's 22GW of installed wind capacity will raise around EUR240 million in 2013.

More importantly for AEE, the bill fails to prevent capacity figures stagnating. After the end of 2012, the government's indefinite renewables moratorium kicks in, freezing new installed capacity. As a result, there have been no new turbine orders for Spain this year, claimed AEE. The government promises to review the moratorium once the energy reform law is finalised. "Fingers crossed," said AEE.

Silver lining

On the brighter side, the bill's new tax on fossil fuel generation will bring in an estimated EUR572 million annually. The bill dedicates that amount to promoting renewables and energy efficiency; "the only real positive signal for us," said AEE.

The bill also taxes both nuclear waste and hydro power's use of river basins, internalising the negative impact of both technologies, so levelling the playing field for renewables.

The government estimates both taxes combined will raise EUR574 million annually 2013-15.

The cash-strapped government's reform proposal aims to slash the EUR24 billion deficit across Spain's electricity sector. The bill, comprising nothing other than taxation measures, will go forward for parliamentary debate in October.

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