Spain Slashes Subsidies for Solar Thermal, for Some Wind-Energy Plants

Spain reduced subsidies paid to solar thermal power plants and some wind farms to limit the cost of electricity for homes and businesses.

The government reduced the subsidies earned by wind-power generators registered under the 2007 Royal Decree 661 by 35 percent until 2013 and eliminated support for solar thermal plants during their first year of operation at a cabinet meeting in Madrid today, the Industry Ministry said in an e-mailed statement. Both technologies will face limits on the number of hours they can earn subsidized rates.

Prime Minister Jose Luis Rodriguez Zapatero is trying to rein in power prices to boost industrial competitiveness and consumer spending. The cost of delivering electricity to Spanish homes has exceeded the revenue from consumers each year since 2005, with the accumulated deficit forecast to reach 14.6 billion euros ($20 billion) by the end of this year.

The measures will reduce Spanish power costs by 1.1 billion euros through 2013 and were approved by industry trade groups in July, according to the government.

The government’s plan to sell bonds backed by that debt faltered last week as the turmoil in sovereign credit markets forced bankers working for the state to postpone the first tranche of the program.

The delay leaves utilities such as Iberdrola SA and Endesa SA to carry the debt on their balance sheets. Under Spanish law, the utilities are obliged to cover the so-called tariff deficit by lending money to the electricity system.

To contact the reporter on this story: Ben Sills in Madrid at bsills@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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