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Spain to Cut Subsidies for New Solar Power Plants

Aug. 1 (Bloomberg) -- Spain is proceeding with plans to cut prices for solar power from new generators, the Industry Ministry said, after talks on broader changes to renewable energy subsidies broke down last week.

Prices for power from ground-based panels may be cut by 45 percent while photovoltaic generators mounted on large roofs face a 25 percent reduction and plants on small roofs will see a 5 percent cut, the ministry said in a statement.

The price cuts are included in a draft law sent to the national energy regulator for consultation.

Discussions on broader changes to subsidies for solar power were suspended after ministers and company executives failed to agree on prices for existing plants. Prime Minister Jose Luis Rodriguez Zapatero’s government wants to keep a lid on electricity costs by paring back a 2007 law granting above-market prices for clean-energy producers.

Spain’s 52,000 photovoltaic-panel installations earn as much as 440 euros ($573) a megawatt-hour, or almost 10 times the futures price for 2011 power in the wholesale market.

A spokesman for Industry Minister Miguel Sebastian said in April the government may cut the rate paid to existing plants in addition to ones yet to be built, as the government seeks to boost the competitiveness of Spanish industry by reining in power prices.

Funds including London-based HG Capital and Denmark’s AP Pensions have argued that the government was reneging on its legal obligation to maintain the subsidies for 25 years.

The Spanish Banking Association estimated domestic banks have loaned 40 billion euros to renewable-energy projects. Some 600 photovoltaic plant operators may face bankruptcy if the subsidies are cut, the Photovoltaic Industry Association has said.

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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