Europe turns tail on wind: cuts subsidies, taxes profits

tax for windmill

The honeymoon is over guys

Well it has started in Europe  – the march away from subsidies for intermittent and unreliable power sources such as wind energy. We’ll let Brady Yauch, an economist and Executive Director from the Consumer Policy Institute in Canada, explain.

Governments rip up renewable contracts
Brady Yauch
18 March 2014

Europe’s renewable energy investors are facing a harsh reality – that the promises from politicians can be taken away at any moment. Canada’s renewable energy investors may soon face that same reality. Governments across Europe, regretting the over-generous deals doled out to the renewable energy sector, have begun reneging on them. To slow ruinous power bills hikes, governments are unilaterally rewriting contracts and clawing back unseemly profits.

In Italy, one of Europe’s largest economies and one that lavished billions in subsidies on the renewable sector, the government in 2013 applied its so-called “Robin Hood tax” to renewable energy producers. Under the new rule, renewable energy producers with more than €3 million in revenue and income greater than €300,000 must now pay a tax of 10.5%. Robin Hood Tax

That follows a 2012 move to charge all solar producers a five cent tax per kilowatt hour on all self-consumed energy. The government also told solar producers that it would stop taking their power – and would offer no compensation – when their output overwhelms the system.

The result of these and other changes, says the solar industry, has been a surge in bankruptcies and a massive decrease in solar investment. In Belgium – where both regional and federal bodies hand out renewable subsidies – a number of retroactive changes have capped the largesse renewable producers once received. In one region the price for “green certificates” – which producers received for renewable energy – was slashed by 79%. The government original committed to buy green certificates at a benchmarked price for 20 years, then cut it to 10 years.

Belgium’s regulators tried to impose a fee on all energy added to the grid from small- to medium-sized solar producers. While the country’s court of appeals struck down that fee, a defiant regional government plans to reintroduce it next year, forcing all solar producers to pay an annual fee that varies with the power they pump into the grid. Various municipalities, meanwhile, are introducing taxes on new and existing wind turbines.

As in Italy, Belgium’s renewable sector in the county has gone dark –“imploded” in the view of a solar industry publication. Many companies shrank or went bankrupt.

In France the government last year cut by 20% the “guaranteed” rate offered to all solar producers, and retroactively applied it to projects connected to the grid in the previous three months. The government is also considering ending an 11% tax break on solar energy producers.

Perhaps the most dramatic moves occurred in Spain, for years the poster child for those touting a transition to green energy. Since 2000, Spain has given renewable producers $41-billion more for their power than it has fetched on the open market. To recover those subsidies, the Spanish government recently killed its Feed In Tariff (FIT) program for renewables, which paid them an outlandishly high guaranteed price for their power, replacing it with the market price for their power plus a subsidy deemed more “reasonable.” Companies’ profits are now capped at a 7.4% return, following which they must then sell their power at market rates. That measure is retroactive, with renewable energy producers who got too fat off their profits now being starved until they reach the 7.4% cap.

For example, if a company spent $100-million on a solar installation in Spain and was posting a return of 14%, or $14-million, annually on that investment, then the government would cut it off from subsidies until its total return – starting from when it was first built – fell to 7.4%, or $7.4 million, a year.

Wind projects built before 2005 will no longer receive any form of subsidy – a move a wind energy trade group called a “sacking” of the sector that will see more than a third of wind producers lose their subsidy.

The fallout in Spain was immediate. Its solar sector, which once employed 60,000 workers, now employs 5,000. The wind sector is estimated to have laid off 20,000 workers. Ikea – the Swedish furniture retailer that became enamoured of renewables – announced it was cutting its losses and abandoning a solar plant it had built in Spain. Investment in the sector also collapsed. In 2011, Spain attracted $10 billion in solar investment. In 2013, the level of investment dropped by almost 90%.

Spain’s Supreme Court offered no sympathy to the solar industry, in ruling against its argument that the government’s retroactive changes were wrong. “The evolution of the energy sector … was putting the financial sustainability of the electricity system at risk,” the court decided, adding that the companies “do not have a right [to expect the government compensation regime] not to be changed.”

Europe’s renewable energy investors are facing a harsh reality – that the promises from politicians can be taken away at any moment. Canada’s renewable energy investors may soon face that same reality.
Financial Post

STT thinks that Australian renewable energy investors may also face this reality very soon.

Brady Yauch

Brady Yauch

About stopthesethings

We are a group of citizens concerned about the rapid spread of industrial wind power generation installations across Australia.

Comments

  1. cornwallwindwatch says:

    Reblogged this on Cornwall Wind Watch.

  2. The wind scam appear to have run its course, its had to keep a swindle going for over ten years and that period is now up. Scammers feel the need to be inventing the next big thing and we will see that unfold. Wind scam politicians will be voted out and the incoming ones will be immune to wind lobbying but not immune to other scams.

  3. Terry Conn says:

    With ‘premiers’ as thick as Barry O’Farrell and his trusty cabinet who have doled out democratic parliamentary responsibility to the epitome of ‘arrogant ignorance’ by way of the NSW Planning Assessment Comission who have approved every wind farm proposal they have looked at then we still have a long way to go before reality bites those in power in this country. Do we really have to be as ‘broke’ as Spain before they wake up? Can Tony Abbott and some of his crew really get their message through? Certainly not unless we keep the letters going out to all and sundry. Keep up the great work STT.

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