Global Observer

Sunny Spain aims to tax renewable energy

Sunny Spain aims to tax renewable energy

Posting in Government

GRANADA -- Spain is about to start taxing green energy producers, which could deter any further investment in an arena for which Spain is famous.

GRANADA, SPAIN --Stumbling around in the dark on a cloudy, winter day, trying to care for his eight alpacas, five dogs, four kittens and three chickens, Alan Parks would be happy to simply flick on a light switch, but his off-grid existence is par for the course outside Montoro, Andalusia, about 15 kilometers from the nearest outlet. It'd cost him thousands of euros to get connected to mainstream electricity, and he'll be damned if the Spanish government is going to start taxing the solar panels that keep him and his small farm going.

In a last-ditch desperate attempt to close its continually widening deficit gap, Spain looks to tax the one area of construction where it still holds a good reputation: renewable energy. And it's not just targeting the big industries; it's going after the little guys in the far reaches of the country, too.

"I assume they won't be taxing me as I have power supply here and cannot afford to connect to the grid. If they want to tax me, they can connect me, and then I'll happily pay the tax on the 'leccy' [electricity] bill," Parks said. However, with the law's lack of clarity, he might be taxed anyway.

Spain has always stood at the forefront of green energy. In 2007, the year before the start of the economic crisis, the Spanish government decided to invest in green energies by increasing the price it subsidized for solar energy to 12 times the price it subsidized conventional electricity, among other pro-green initiatives. Spanish energy giants Iberdrola, Endesa and Acciona worked furiously to infuse their grids with clean energy, and farmers, among others, jumped at the chance to take better advantage of their often arid and challenging terrain, by taking out loans to scatter their fields with the wind mills and solar panels you see across the Spanish countryside today.

Because of this green initiative, by 2012, Spain had doubled its renewable energy output and was ranked third or fourth in the global production of renewable energy, falling behind the U.S. and Germany and in-line with China. Spain became the example of green energy success touted by other world leaders.

So what's changing now? Spain's debt has hit a record-breaking €882 billion. About €26 billion of that is what Spain owes power companies for a decade-long subsidization for selling electricity at less than cost to its customers, as well as the country's ample investment in going green, which, according to The Economist, increased 18-fold in the last five years.

Earlier this summer, the Spanish Ministry of Industry laid out its plan to cut off its subsidizing of green energy, equating to about a €2.7-billion charge to utility companies and wind and solar farmers, passing on a roughly 40-percent hike to energy consumers.

"I just think the Spanish government is running out of options," said John Wolfendale, Granada-based co-owner of Eco Vida International, a firm focused on creating energy efficient design and building in Spain, both from the ground up and through renovations. Wolfendale is reasonably worried about the new laws' effects on his business because, if renewable energy costs more than conventional, far fewer people will be looking to make their homes greener.

Parks thinks the law might make sense, so long as it doesn't affect him and his off-grid brethren. "When Spain first introduced the 'feed-in' tariffs, they guaranteed that if you put solar panels on your roof, and connected it back to your electricity company, that they would pay a certain amount per unit of electric generated," Parks said, who believes the payback "was too high. So fields of solar panels started springing up, where farmers could make money that way, [rather] than actually farming the land."

The Spanish government isn't just going after some of its largest companies and its farming backbone -- it's starting to heavily tax those who produce their own energy too.

The Ministry of Industry has also drafted legislation for a tarifa de respaldo or a support tariff that will charge people that produce their own renewable energy, at a rate which the Spanish Photovoltaic Union (UNEF) says is higher than those using conventional or gridded energy.

In the end, the new tariff deters those who are connected to the urban grid from continuing to produce supplemental energy, while it could simply harm those off-grid in rural Spain. No one will know for sure until the power bills start coming in.

Wolfendale says people who are completely off-grid usually have no other option but to produce their own energy. For folks that are on-grid, they go green to be more energy efficient and to save money. He says, "your electricity meter goes backwards basically in the Spanish summer sun, but then it goes up in winter," making many people break even in energy costs, at least while the power companies were still buying part of their input.

Since the housing bubble burst, one of the hardest areas hit was architecture. In a sudden void of construction design jobs, one of the few outlets Wolfendale said architects had was that "young intelligent architects are teaching themselves about [renewable renovation] because they understand it's what people want."

However, people will want green energy a lot less if it stops saving them money, which means another hit to Spain's architects and the environment as a whole.

Photos: Markel Redondo/Greenpeace; Jennifer Riggins

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Jennifer Riggins

Correspondent (Barcelona)

Jennifer Riggins is the content manager and community builder for two SaaS Quote Roller and PandaDoc, as well as she teaches sales, English, and public speaking for Spanish small business. She holds a degree from William Paterson University. She is based in Spain. Follow her on Twitter. Disclosure