Europe Rolls Back Green Energy Subsidies

  • Date: 28/02/15
  • EurActiv & Jones Day

Bulgaria’s parliament scrapped preferential prices for new renewable energy installations on Thursday as the country is struggling to cut deficits in the energy sector and keep a lid on consumers’ utility bills. High utility bills had sparked protests which toppled the government  in February 2013.

Wind power farms and photovoltaic parks mushroomed in 2011, after Bulgaria introduced generous subsidies for renewable energy, guaranteed for 20 years and committed to buy all the energy produced by them.

But the incentives have weighed on the power costs in the European Union’s poorest country, which has met its 2020 target for a 16% share of renewable energy at the end of 2013.

The granted incentives will still be valid for already operational wind and solar energy plants.

The amendments of the energy law, approved by the parliament, also envisioned that the public power provider NEK will not be obliged to buy power at preferential prices from heating power plants that cannot prove energy efficiency.

The renewable energy boom, incentives for co-generating power plants and high costs under long-term power purchase agreements, have soared NEK’s deficit to 3.3 billion levs (€1.65 billion), the energy ministry has said.

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Italy Cuts Solar Subsidies Retroactively

The European Photovoltaic Industry Association (EPIA) on Monday issued a statement warning that new legislation approved by the Italian senate last month that retroactively cut once guaranteed solar feed-in tariffs (FiT) will not only damage the country’s PV industry but also the image of Europe as a region of stable investment.

Italy’s decree-law, adopted on August 7, introduces significant retroactive FiT cuts and new taxes for self-consumed electricity. The legislation retroactively modifies the way FiTs will be paid as of January 1 to existing PV installations. PV system owners, which were granted 20-year FiTs under the Conto Energia mechanism will now have to choose between three options that result in a cut of the previously guaranteed rates.

 

Green Energy Investors Suffer Huge Losses, Take Legal Action Against Subsidy Cuts

The solar, hydro and wind sector exploded following the introduction by many European countries of favourable feed-in tariffs (“FiTs”) that paid renewable-power generators above-market rates for their output and provided subsidies to consumers who installed renewable energy solutions in their homes. These incentives were offered in large part to help countries meet their EU targets on renewable energy. With generous and long-lasting FiTs promised by governments, investment poured in. However, demand was grossly underestimated, which led to a substantial increase in consumer energy prices as the FiT costs were passed on, and ever-increasing deficits in the energy budgets of many governments. 

As governments rolled back FiTs and failed to honour other governmental guarantees, investors in the renewable sector have seen their investments decimated, or at least substantially reduced. Many have already turned to investor–state arbitration in an attempt to recoup their investments. Indeed, 23 percent of known investor–state arbitrations in 2013 arose as a result of measures regarding renewable energy adopted by Spain and the Czech Republic. All claims are currently pending, and more claims are expected to follow.

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