Spanish leadership in Concentrated Solar Power is at risk and creates legal uncertainty in opposition to Spain’s PM speeches.
Spain’s Government is about to deal a death blow to the Spanish leadership in the Solar Thermal Electricity (STE) sector (also referred to as concentrated solar power or CSP), which contributed to Spanish GDP with €2084 millions, as it wants to change retroactively the regulatory framework under the projects were deployed.
The new law (Fiscal Law for Energy Sustainability) is under debate in the Senate without taking into account that the current regulation framework has made possible the deployment of this sector, making it attractive to investors from all over the world (US, UAE, Germany, France, Italy,…), thanks to a stable and proper regulation that made these investments a safe choice.
The Government is now about to change the rules “in the middle of the game”, what could create a legal mistrust of foreign investors about Spain and the Government would have to face to massive claims in the International Court of Arbitration, alongside with the damage to Spain’s image abroad and the influence in the risk premium of Spain’s sovereign bonds and debt. And all this just after Spain’s PM Mariano Rajoy, had stressed the need to provide legal certainty to Spanish investments abroad, something that in accordance to international rules, foreign and local investors are requiring to Spain.
A measure to be included in the law is to reduce the premium the STE plants receive because of the natural gas these plants need to achieve a better performance. This reduction jointly with the proposed 7% tax to the incomes would produce a dramatic impact in the plants benefits, which would see the net incomes decreased by a 22%.
The proposed law, instead of offering a new framework to which companies that are promoting new projects could try to tailor the future plants operation, affects dramatically to current plants under operation or under construction, which will not have margin of action in any way.
Administration established the “rules of the game” to accurately define the rights of stakeholders; among others, the right to use natural gas with a given limit to improve performance, while the whole generation would be incentivize. This was made so to allow the plants operators to achieve a reasonable profit, and to offer a stable regulation framework to promote the deployment of STE plants. This has been highlighted by the Administration numerous times during the past years, and this has made the investors (local and abroad) to decide to invest in the STE sector.
Once the costs and financing conditions were established and the plants are under operation, these regulatory changes will result in an actual damage easily to prove.
Much to our regret, the debate is not focusing in the discriminatory and retroactive nature of the measures proposed neither in the “reasonable profits” that the “Law of Electric Sector” says have to be guaranteed. Not even in the loss for the companies’ current value and financing conditions.
This has become a “matter of survival”. Nobody wants these investments to be thwarted, especially in the current economical context of Spain. Because of these reasons, at Protermosolar we think the Government will modify the proposed law to avoid the strongly discriminatory and destructive measures for the STE sector.
Spain is currently running the 70% of global STE market, which has a foreseeable billionaire market to come all over the world. Spanish companies are being awarded with important contracts for STE plants abroad, providing economic returns to Spain and improving the country’s image abroad. But these prospects will be curbed with the new proposed law.
According to the information gathered from CSP companies in Spain during 2011, for every euro the sector has received trough incentives, it has returned five to the GDP, it has returned two euros in taxes, imports savings and avoided unemployment subsidies. STE sector has received €427 millions in incentives through Feed-in-Tariff to the electricity production, and it has returned €2084 millions to GDP, €564 millions to taxes , it has avoided €78 millions in fuel imports, emissions’ rights, and it has also avoided €213 millions in unemployment subsidies. The figures are available at Protermosolar’s website (http://www.protemosolar.com
Spain has currently 39 STE plants under operation, most of them in the southern half of the country, the less industrialized areas and they are contributing to the economic convergence of these regions with the whole country. Every plant under construction generates 2214 jobs-year during construction alongside with the workers needed to operate them.
As a result, the STE sector is widely profitable for the whole country, thanks to the leadership accomplished with more than 30 years of R&D efforts of Spanish companies and research centers.