The Spanish government is exploring ways to persuade investors to finance a $116 billion transformation of its energy system as it tries to move beyond past policy mistakes that led to widespread losses and lawsuits.
The Socialist administration is drawing up plans to expand renewable power generation, modernise its transport system and refit buildings to make them more energy efficient through 2030. But the effort to mobilise private investment is hampered by ongoing legal disputes from the party’s last green energy push a decade ago, which saw over-generous solar power subsidies cut retroactively. The U-turn affected as much as 21 billion euros of senior debt, according to Bloomberg NEF.
“We have to craft carefully a proposal that is adequate, credible and sound in terms of new investments, both for national and foreign investors, and also providing some recognition about what happened,” Teresa Ribera, minister for the ecological transition, said. “It can be through regulatory means or it can be via fiscal means.”
Ribera has limited room for maneuver because the government is still fighting legal claims from investors over cuts in subsidies for photovoltaic power plants. Spain became the world’s biggest installer of PV panels in 2008 after the government misjudged the amount of subsidy required to stimulate investment.
The payments were gradually reduced over successive years — leaving some plants struggling to cover their financing costs — as they began to jeopardise the public finances.
Power prices in Spain have surged this year, with one-year futures for baseload power rising more than 30 percent. That’s a headwind for an economy that’s set to slow for a fourth straight year in 2019 and is fueling calls for the government to tackle the windfall profits of hydro and nuclear plants owned by companies including Iberdrola SA and Enel SpA.