Spain Zaps Power Generators With 7% Tax to Curb Deficit

The Spanish parliament passed an energy law that will impose a 7 percent tax on electricity generation starting Jan 1, a step to close a funding gap the power companies built up with the government.

The government is “on track” to plug the tariff deficit, which amounts to about 6 billion euros ($8 billion) a year and represents the difference between costs and revenue in the power system, Industry Minister Jose Manuel Soria said today in Madrid. “Now we must approach the regulatory aspects.”

The measures hit both traditional and renewable energy plants and mark the first time Spain has taxed wind and solar power plants. The government halted subsidies for all clean energy projects earlier this year after a boom in installations drove up electricity prices and boosted the tariff deficit.

“Come Jan. 1, we will realize we’re missing 7 percent from our balance sheets,” said Jose Miguel Villarig, the president of APPA, a group of clean energy producers.

Renewable energy plants generated about 27 percent of Spain’s electricity last year and receive about 7 billion euros annually in subsidies. Those have inflated the tariff deficit.

The tax set out today is bigger than the 6 percent tax set out in a previous draft of the legislation detailed on Sept. 14. That included a levy on fossil-fuel fired plants as well as nuclear and hydropower. It also had a flat tax for both traditional and low-carbon energy, which aims to raise about 2.7 billion euros ($3.5 billion) a year.

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