Economics, Energy and the Environment

Spain axes clean energy subsidies

Here’s what happens when you rely on rent-seeking to sustain you rather than value creation (via Bloomberg):

Spanish renewable-energy companies that once got Europe’s biggest subsidies are deserting the nation after the government shut off aid, pushing project developers and equipment-makers to work abroad or perish. …

Saddled with a budget deficit more than twice the European Union limit and a ballooning gap between income and costs in its power system, Spain halted subsidies for new renewable-energy projects in January. The surprise move by Prime Minister Mariano Rajoy one month after taking office helped pierce investor confidence in stable aid for clean energy across Europe.

“They destroyed the Spanish market overnight with the moratorium,” European Wind Energy Association Chief Executive Officer Christian Kjaer said in an interview. “The wider implication of this is that if Spanish politicians can do that, probably most European politicians can do that.”

Spain’s $69 billion of investment in power capacity from 2004 to 2011 was about triple the spending per capita in the U.S. in that period, according to Bloomberg New Energy Finance data and U.S. Census Bureau population estimates. Most of the 2012-2013 spending will be for the legacy of projects approved before the aid cuts to wind, solar, biomass and co-generation.

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