Growing Trouble in Europe’s Renewable Sector

Uncertainty about government support for Europe's renewable sector has deepened, with France suspending feed-in tariffs for new solar photovoltaic (PV) installations and Spain slashing subsidies for wind and solar thermal projects.

A draft decree announced by the French government last Thursday seeks to impose a four-month suspension on feed-in tariffs for new solar PV installations of more than 3kW capacity, in a bid to prevent what the French prime minister called a "veritable speculative bubble".

French industry groups have hit out at the proposal, describing a four-month tariff moratorium to local press as "unbearable" and "absurd".

Boris Martor, a Paris-based partner in Eversheds' clean energy practice, said the development is a "big surprise" and will increase uncertainty in the market.

"The moratorium will have a bad impact in terms of general financing of projects, and it's quite worrying because this kind of measure is quite unpredictable and doesn't add a lot of security to the structuring of projects," he added.

Meanwhile, on Friday, the Spanish government approved a 35% cut to incentives until 2013 for wind projects covered by the 2007 subsidy regime - estimated by industry groups at around 25% of the market - and removed support for solar thermal projects in the first year of operation. The ruling, which is in line with proposals put forward in July, also limits the number of hours wind and thermal facilities can be eligible for government support.

The revision  - which comes after Spain approved cuts of up to 45% to the country's solar PV industry, last month - are not expected to have a significant impact on industry.

Protermo Solar, a Spanish solar thermal industry association, said it is "reasonably satisfied" with the approved changes to the solar thermal sector. A spokeswoman for Spain's wind industry group, Asociación Empresarial Eólica, welcomed the ruling on wind installations, saying it will bring certainty and stability back to the market.

John-Marc Bunce, a London-based clean-tech analyst with Nomura Code, said the incentive cuts to Spain's wind sector will likely have "knock on effects", but added that "a lot of that risk has been factored into these guys' business models".

Against this backdrop of subsidy uncertainty, a group of Spanish researchers and wind companies, including Iberdrola and Gamesa, have announced plans to build a 15MW offshore wind turbine. The €25 million monster turbine is not expected to be ready for market until 2020.

By. Charlotte Dudley

Source: Environmental Finance