Spanish Update: Solar Thermal Energy, currently in a vulnerable position

Will have to wait until March of 2015 in order to appeal the new cuts

Due to the recent passing of a new Royal Decree-law (RDL) 2/2013- stipulating the enforcement of emergency measures in the electricity and financial sectors, solar thermal energy-as well as other renewable energies—find themselves in a critical and very vulnerable position.


By Jorge Alcauza 
The latest change is the last straw in many absurd changes that the Spanish government has taken to reform the regulations that control this sector.

Prior to this recent change, the Spanish Parliment passed the RDL 15/2012 in December of last year stipulating modifications in financing for sustainable energies. This law included a levy tax of 7%, which had been anticipated by most, for all producers of electricity-renewable or otherwise- adding a “so –called gift” targeted at solar thermal energy, eliminating the right to premiums, proportional to gas consumption, from the electricity production, even though the methodology to calculate this proportion hasn’t yet been established.


On 2 February 2013, the regulation RDL 2/2013 was passed, which eliminates the option designated as “market price plus premium.” This method, preferred by most of the installations, allowed the plants to sell electricity and receive as compensation the price that the market set, plus a reference premium, which was fixed last year at 28.1894 cents per Euro for kWh.

The new regulation stipulates that from January 1st of this year, the plants can only apply the method of a feed-in tariff, which will automatically be applied to all the plants that were previously applying the “market price plus Premium.” This new normative also stipulates that there will be a retroactive liquidation of the premium from the period of January 1, 2013 until the time that the law went into effect, which is in accordance with the new tariff regulations. During the year the feed-in tariff will remain fixed at 29.8957 Euro cents per kWh.

It’s highly unusual that a decree passed on February 2nd of this year is able to be made retroactive. According to some experts consulted by CSP Today, it is probable that this aspect of the new regulation will have to be revised as there are clear regulations regarding it.

Another important point to consider regarding this latest change—apart from the retroactive aspect of this regulation—is the change in the index used annually to update premiums, which until now had been the Index of Consumer Prices and published by the Institute of National Statistics of Spain.

The new index that will be used is referred to as, “el Índice de Precios de Consumo a impuestos constantes sin alimentos no elaborados ni productos energéticos.” This index, also known as the core inflation index, doesn’t include variations in taxes—which have increased considerably in the past year—and eliminates more volatile elements in its rates calculations as is the case in prices of energy products. To illustrate this change, according to the most recently published data of the latest IPC, in December of 2012, the rate stood at 2.9%, while with the new index, it stands at 0.2%. Furthermore, to these values one must apply an adjustment to the decline of 50 basic points, which leaves us with a compensation that will not increase by 2.4%, but, in fact , decrease by 0.3%. It’s important to point out that until now the data from the IPC from October was being used given that the order that stipulates the premiums usually comes out in December and the latest information from the National Institute of Statistics was being applied, although it seems that everything points to the fact that the regulated tariff for 2013 was inferior to that of 2012. 


What options does thermal solar have?
Given this latest measure, it is estimated that thermal solar energy profits will decrease by 30%. Although it’s a devastating picture, there doesn’t seem to be much margin for making adjustments. Nevertheless, there still might be some options.
According to Ignacio Borrego, partner at the prestigious law firm Watson, Farley & Williams, there are several possibilities in terms of legal recourse which the affected companies can resort to, not only due to the recent change, but to all of the changes that have occurred in recent months.
In the first place, one must bear in mind that both the Law 15/2012 as well as the RDL2/2013, according to Mr. Borrego, can’t be applied either to individuals or to companies before the Constitutional Courts, because of their specific nature, but need to be brought to the Supreme Court, which deals with questions of an unconstitutional nature. However, it’s unlikely that this will occur, in part, because the process to evaluate these questions is slow and can take years to resolve.

What would be in the power of the companies that own solar thermal energy plants would be to appeal the implementation of this decree, that is to say, resort to legal recourse. However, Mr. Borrego warns that this wouldn’t be possible until March of 2015, which is the anticipated date for a definitive liquidation, that is if there are no delays like there have been so far, which have occurred because the liquidations have been on a provisional basis, something which the Supreme Court had already considered in order to deny various appeals from the photovoltaics.
In spite of this, Ignacio Borrego thinks that it would also be possible to take legal action against the provisional nature of the liquidations because of their unconstitutional nature before the Tribunal Courts against other authorities, such as the President of the Government, the Ombudsman, 50 government deputies, 50 senators and other executive of the regional governments and their assemblies.

Another possibility would be to go to the European Human Rights Courts after all the alternatives have been exhausted in Spain.
An option that Protermosolar, the Spanish Association of Solar Thermal Electric Industry, has already taken, and that Mr. Borrego also suggests would be to go to the International Court of Arbitration to see if they can clear up the fact of whether,” only foreign companies can use the allocated funds and if that would be incompatible with the internal channels in Spain.” However, in the same thermal solar plant, there can be funds from foreign companies as well as Spanish companies that can be obtained from different sources.
The last resort that is suggested by Mr. Borrego is to appeal to the State Legislature to ask for compensation for the investment made and for the income lost in exchange for dismantling the plants; a reminder of the moratorium on nuclear plants that the Spanish consumer is still paying for.

What has become very clear through this entire process of legislation based on decrees, upon which all of the sources consulted agree, is that there has been a complete lack of consensus and accountability necessary in such situations.
Last but not least is the negative effect that these changes have on Spain’s image abroad and the feeling of insecurity that the legal system produces.


The exception to the rule?

The decree includes an exception in article 4. The thermal solar plant that was awarded a contract to a consortium created by the US Solar Reserve and the Spanish Preneal—although the latter has withdrawn from the project—will not be affected by the recent changes. The plants that were awarded contracts in open biddings under the category of “projects with an innovative character” are excluded from the new rules, and the only plant that falls into this category is the above-mentioned one.
This exception has incited a general resentment in a great part of the renewable energy sector with the knowledge that this plant, in particular, has received special treatment.

Summary of the long and painful history of regulations for thermal solar energy
The Popular Party (PP) government
Law 54/1997 of the electricity sector

- A “special tax system is created for renewable energies and co-generation.”
Royal Decree2818/1998 of December 23rd
- Development of regulations of the special system
Royal Decree 436/2004 of March 12th
- Methods for a special legal and economic system (premiums are established according to percentages based on the electricity market averages)
The government of the Spanish Socialist Worker’s Party
Royal Decree 661/2007 of May 25th

- Production is regulated in the special system—the goal of building 500 MW thermal solar plants of 500MW with new premiums
Royal Decree-law 6/2009 of April 30th
- A pre-allocation register is created
Agreement with the Council of Ministers of November 13, 2009
Projects are required to be pre-registered (regulations of entry and increasing energy power ceilings are created due to the large number of applications)
Royal Decree 1565/2010 of November 19th
- Specific system for innovative thermal solar energy installations
Royal Decree 1614/2010 of December 7th
- Limitation of the hours equivalent to the right to premiums

The Popular Party Government
Royal Decree-law January 1st to 27th of 2012
- Moratorium on renewable energies
Law15/2012 of December 27th
- 7% tax and withdrawal of premium of the part which is proportional to the natural gas used at the plants
Royal Decree-law 29/2012 of December 28th
- Measures taken to withdraw rights to premiums if the deadlines to start operations are not met. This point was not previous regulated and was clarified in a RDL of domestic employees in which the right to a premiums is not respected in the case of not meeting deadlines.
Royal Decree-law 2/2013 of February 1st
- Elimination of “market plus premiums” preventing the possibility of thermal solar energy plants to sell energy at the moment of highest demand and the modification of the IPC in the updating of tariffs.