A new ‘windfall tax’ on wind farm revenues introduced by the Spanish government will cause huge damage to future investment in the sector and risks undermining the EU Green Deal, WindEurope has warned.
The lobby group was reacting to the entering into force on 15 September of Royal Decree 17/2021, which introduced urgent measures to mitigate the impact of rising gas prices on Spanish consumers.
Under the decree, all zero-carbon electricity production facilities in mainland Spain must "give back" any excess remuneration to the electricity system when the price of gas exceeds €20/MWh.
The payback amounts will be used to offset the higher cost of electricity generated from natural gas to reduce bills for consumers. The measure is in place from 15 September 2021 until 31 March 2022.
By imposing charges of €40-80/MWh on wind farms on the grounds that they do not buy gas and are thus earning “windfall profits”, the new Spanish law fails to take into account the fact that most wind farms will sell electricity at pre-agreed prices in fixed-term contracts, argued WindEurope.
As a result of the new charges, many wind farms will have to close down and future investment will be in jeopardy, threatening the EU Green Deal’s ambition to boost wind power development, the industry group warned.
Spanish wind energy association AEE has asked the government to amend the rules to ensure that wind farms whose revenues are not boosted by gas price rises should not suffer a revenue reduction. “Regulatory stability is a necessary condition to attract investment in the sector,” it stated.
In a clarification document published on 20 September, Spain’s Ministry for the Ecological Transition stated that certain wind farms with long-term PPAs in place and fulfilling a number of other requirements would be exempt from the charges.
Meanwhile, Spanish renewables association Appa has threatened to take the government to court over the decree. “This new rule has many rough edges and there are difficulties fitting it into Spain's constitutional and EU law parameters,” said Ramón Vázquez del Rey Villanueva of law firm Fieldfisher.
The decree is in force but has yet to be confirmed by the Spanish parliament, which has the power to modify or eliminate some of its controversial provisions, Vázquez del Rey Villanueva added.