Spanish renewables industry breathes sigh of relief at modest incentive cuts

Shares in Spain's largest wind and solar energy firms climbed yesterday, after the renewable industry reached a deal with the Spanish government that should result in lower-than-expected cuts to subsidies.

Shares in the renewable energy arm of Spanish energy giant Iberdrola rose 7.9 per cent, while rival energy firm Acciona SA saw its share price climb 6.5 per cent. The renewable energy division of Portugal's EDP-Energias de Portugal SA, which operates wind farms in Spain, saw its share price climb by more than seven per cent.

Renewable energy specialists such as Spain-based wind turbine manufacturer Gamesa Corp and solar farm operator Abengoa, similarly enjoyed share price gains following the announcement of the deal.

The agreement between the Spanish Wind Energy Association, the Spanish solar thermal power plant trade association Protermosolar, and the Ministry of Industry, Tourism and Trade was announced late on Friday.

The complex deal imposes a series of cuts in the level of support for wind farms and solar thermal power plants, designed to reduce the cost of Spain's generous subsidy regime by around €1.3bn.

However, the scale of the cuts is far lower than initially feared by the industry and experts said that they were unlikely to have a major impact on plans for new wind farms and solar parks.

Under the deal, wind energy subsidies for projects completed since 2008 will be cut by 35 per cent until the start of 2013 and the start date for a number of concentrated solar power plants will be delayed.

A cap will also be placed on the number of hours eligible for special feed-tariff premiums, although analysts suggested that the cap had been set at a level that renewable energy projects were unlikely to reach.

"The agreements include short-term measures that will allow a reduction of the impact of these technologies on electricity prices, and long-term ones that will give these technologies stability and certainty for their future development," the government said in a statement, adding that the cap on premium tariffs meant that "renewable production above that which is expected benefits consumers and does not compromise the economic sustainability of the system".

Wind and solar thermal firms praised the deal, predicting that it would provide them with the regulatory certainty required to continue investments.

However, not all companies in the Spanish renewable energy sector were celebrating this weekend, after speculation that the relatively generous settlement for large-scale renewable projects meant that the government is more likely to focus subsidy cuts on the photovoltaic solar industry.