Spanish solar FITs revisited
Today, we take a closer look at why the guaranteed 7.5% return on investments in renewables in Spain is nonetheless cause for alarm.
German journalist Ralf Streck, an expert on the Iberian peninsula, reports that Spanish renewables organizations are up in arms about the switch from feed-in tariffs to a guaranteed return on 7.5%. One calls the move “political barbarism”; another, “covert expropriation.”
Still, a 7.5% guaranteed return sounds great, so what gives?
As some of my readers pointed out in my last post on the matter, the ROI drops closer to 5% after taxes and other possible charges; Streck points out that the sector itself puts the figure at 5.2% -- still, not bad for a guarantee.
So I spoke again with Toby Couture, who has already written another post on the issue. He told me that the returns are potentially lower than the interest on bank loans in Spain, so there will be no actual return at all for investors at the new level, but only for banks. While special KfW bank loans are available in Germany for renewables at rates under 2%, Spanish banks now charge closer to 8% because the government loans banks money at rates of 4-5% because of the country’s poor credit rating. In contrast, Germany has been paid to take investors’ money as a safe haven in recent years.
Couture told Renewables International, “the new rules will have significantly different impacts on a case by case basis for each existing project. If they can re-finance at low rates, they might be ok; otherwise, hard to say. Unfortunately, in light of all the retroactive changes, refinancing is undoubtedly going to be harder (as banks won't want to touch it), and costlier.”
Both Streck and Couture agree that the main damage has been to Spain as an investment community. The country has retroactively changed its solar policy five times in just a few years. Streck writes that “large investments firms” plan to challenge the Spanish government in EU courts. Couture says a number of conservative investors, such as Skandanavian pension funds, put their money on renewables in Spain years ago. “It’s not just small investors who feel cheated,” Streck writes. (Craig Morris)
What a disaster for Spain. Their one and only hope in the post cheap oil world and they blew it. All those motorways to nowhere that were built and that are now deserted because no one can afford the tolls all those airports built for nothing housing built that are empty. Energy down the drain which could have been used to build a sustainable future. Who is going to invest in renewables now when the government can pull the rug from under you at any time. What hope is there for Spain now?
And the guarantee only applies to large renewables projects. Domestic solar installers face a ridiculous and prohibitive "backup fee" for their self-consumed electricity.