Spain’s Homes Pay Power Policy Costs as Industry Shielded

Spain’s smallest power users are footing the bill for government policies to support renewable energy producers, domestic coal mining and people living on the country’s islands, as industrial consumers are shielded, according to an economic researcher.

The so-called government wedge accounted for 50 percent of residential consumers’ bills last year compared with just 12 percent for large industrial users, David Robinson, a senior research fellow at the Oxford Institute for Energy Studies, said in a report published today.

“The government appears to have allocated a larger share of the costs of public policies to residential consumers,” Robinson said in a telephone interview. He said there is “very little transparency” in how the costs are allocated.

Spain’s power system has racked up debts of about 26 billion euros ($36 billion) over the past decade as successive governments failed to raise sufficient revenue to cover the system’s costs after piling special charges onto residential users bills, such as subsidies to clean energy, miners and electricity for homes on the Canary and Balearic islands.

Residential power users have seen the price of their power rise by 59 percent since 2007 to become the sixth-highest in the European Union. The prices large companies pay remain below the EU average, the report said.

“Whenever the government has the opportunity to make it easier for industrial customers to compete in international markets or lower their overall costs, there is going to be a create-jobs reason for that,” Robinson said.

Part of the reason for the increasing costs is due to the government’s insistence on choosing the technologies it wants to deliver its policy goals rather than using market mechanisms to make the selection, Robinson said.

“Governments picking winners is an expensive policy and we see it in the prices,” he said.

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