Spain: Rajoy has tough job to rebuild trust

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Richard Heap
February 16, 2015
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Spain: Rajoy has tough job to rebuild trust

Which serving prime minister has done most damage to wind?

It’s a tough call. Australia’s Tony Abbott must feature strongly because of his plans to cut the country’s renewable energy target, which is putting projects worth $13bn at risk.

Canada’s Stephen Harper shares many of Abbott’s views on wind
and has slashed pro-renewables policies since 2006. But Canada installed 1.9GW last year, so he hasn't done as much damage.

And the UK’s David Cameron is in the mix too. His pledge to scrap onshore wind subsidies if he retains power in this May’s general election has spread uncertainty and dampened investor appetite.

But none of them outdoes Spain’s Mariano Rajoy, whose government has brought in changes that have paralysed the country’s wind industry. Since he was elected in 2011, he has gradually lowered the country’s feed-in tariffs and, last year, retrospectively cut subsidies for the wind industry.

He has, in short, presided over the paralysis of wind in Spain.

Even so, there is now an indication that Rajoy and his government are now looking to put some life back into a sector they killed.

The Ministry of Energy, Industry & Tourism plans to add an extra 8.5GW of renewables capacity by 2020, including around 6.5GW of wind. It is also set to seek financial guarantees from investors to ensure they complete their projects.

This change of heart in Spain will undoubtedly interest investors, including Spanish firms such as Acciona, Gamesa and Iberdrola that have been forced to focus overseas in recent years.

But our question is how many investors will willingly dive into a market where many investors have already been badly burned by government U-turns on renewable energy.

It is all very well for the Spanish government to seek financial guarantees from investors, but what guarantees will it offer to investors in return? Will it commit to the sector long-term? If it does deals this year then will it still honour them in 2020? These are fundamental questions and investors will need answers before developing in Spain again.

Yes, the country has installed capacity of 23GW and this makes it Europe’s second-largest wind market. However, in our view, it is now effectively back to ‘emerging market’ status. The government
has destroyed trust of renewables investors and must now start all over again. If Rajoy thinks he can flick a switch and — hey presto! — see development, he is wrong.

As the saying goes: trust takes years to build and seconds to break.

Now, we understand it wasn’t simply hostility to wind that led to the government’s previous subsidy cuts. Rajoy and his colleagues wanted to fix a ‘tariff deficit’ of €30bn, which was growing at around €5bn a year and which the country has to pay. This gap was caused by generous feed-in tariffs that led to fast growth in Spanish wind in the early 2000s.

The problem was compounded by the outcomes of a global financial crash that hit Spain harder than most other European nations, except Greece and Italy.

Neither of those issues has been fixed, and investors are right to worry that they will take a big hit on their investments if they invest in Spain again now. Rajoy has a tough job ahead of him if he wants to win back the industry’s trust. It'll take more than a 6.5GW target.

Which serving prime minister has done most damage to wind?

It’s a tough call. Australia’s Tony Abbott must feature strongly because of his plans to cut the country’s renewable energy target, which is putting projects worth $13bn at risk.

Canada’s Stephen Harper shares many of Abbott’s views on wind
and has slashed pro-renewables policies since 2006. But Canada installed 1.9GW last year, so he hasn't done as much damage.

And the UK’s David Cameron is in the mix too. His pledge to scrap onshore wind subsidies if he retains power in this May’s general election has spread uncertainty and dampened investor appetite.

But none of them outdoes Spain’s Mariano Rajoy, whose government has brought in changes that have paralysed the country’s wind industry. Since he was elected in 2011, he has gradually lowered the country’s feed-in tariffs and, last year, retrospectively cut subsidies for the wind industry.

He has, in short, presided over the paralysis of wind in Spain.

Even so, there is now an indication that Rajoy and his government are now looking to put some life back into a sector they killed.

The Ministry of Energy, Industry & Tourism plans to add an extra 8.5GW of renewables capacity by 2020, including around 6.5GW of wind. It is also set to seek financial guarantees from investors to ensure they complete their projects.

This change of heart in Spain will undoubtedly interest investors, including Spanish firms such as Acciona, Gamesa and Iberdrola that have been forced to focus overseas in recent years.

But our question is how many investors will willingly dive into a market where many investors have already been badly burned by government U-turns on renewable energy.

It is all very well for the Spanish government to seek financial guarantees from investors, but what guarantees will it offer to investors in return? Will it commit to the sector long-term? If it does deals this year then will it still honour them in 2020? These are fundamental questions and investors will need answers before developing in Spain again.

Yes, the country has installed capacity of 23GW and this makes it Europe’s second-largest wind market. However, in our view, it is now effectively back to ‘emerging market’ status. The government
has destroyed trust of renewables investors and must now start all over again. If Rajoy thinks he can flick a switch and — hey presto! — see development, he is wrong.

As the saying goes: trust takes years to build and seconds to break.

Now, we understand it wasn’t simply hostility to wind that led to the government’s previous subsidy cuts. Rajoy and his colleagues wanted to fix a ‘tariff deficit’ of €30bn, which was growing at around €5bn a year and which the country has to pay. This gap was caused by generous feed-in tariffs that led to fast growth in Spanish wind in the early 2000s.

The problem was compounded by the outcomes of a global financial crash that hit Spain harder than most other European nations, except Greece and Italy.

Neither of those issues has been fixed, and investors are right to worry that they will take a big hit on their investments if they invest in Spain again now. Rajoy has a tough job ahead of him if he wants to win back the industry’s trust. It'll take more than a 6.5GW target.

Which serving prime minister has done most damage to wind?

It’s a tough call. Australia’s Tony Abbott must feature strongly because of his plans to cut the country’s renewable energy target, which is putting projects worth $13bn at risk.

Canada’s Stephen Harper shares many of Abbott’s views on wind
and has slashed pro-renewables policies since 2006. But Canada installed 1.9GW last year, so he hasn't done as much damage.

And the UK’s David Cameron is in the mix too. His pledge to scrap onshore wind subsidies if he retains power in this May’s general election has spread uncertainty and dampened investor appetite.

But none of them outdoes Spain’s Mariano Rajoy, whose government has brought in changes that have paralysed the country’s wind industry. Since he was elected in 2011, he has gradually lowered the country’s feed-in tariffs and, last year, retrospectively cut subsidies for the wind industry.

He has, in short, presided over the paralysis of wind in Spain.

Even so, there is now an indication that Rajoy and his government are now looking to put some life back into a sector they killed.

The Ministry of Energy, Industry & Tourism plans to add an extra 8.5GW of renewables capacity by 2020, including around 6.5GW of wind. It is also set to seek financial guarantees from investors to ensure they complete their projects.

This change of heart in Spain will undoubtedly interest investors, including Spanish firms such as Acciona, Gamesa and Iberdrola that have been forced to focus overseas in recent years.

But our question is how many investors will willingly dive into a market where many investors have already been badly burned by government U-turns on renewable energy.

It is all very well for the Spanish government to seek financial guarantees from investors, but what guarantees will it offer to investors in return? Will it commit to the sector long-term? If it does deals this year then will it still honour them in 2020? These are fundamental questions and investors will need answers before developing in Spain again.

Yes, the country has installed capacity of 23GW and this makes it Europe’s second-largest wind market. However, in our view, it is now effectively back to ‘emerging market’ status. The government
has destroyed trust of renewables investors and must now start all over again. If Rajoy thinks he can flick a switch and — hey presto! — see development, he is wrong.

As the saying goes: trust takes years to build and seconds to break.

Now, we understand it wasn’t simply hostility to wind that led to the government’s previous subsidy cuts. Rajoy and his colleagues wanted to fix a ‘tariff deficit’ of €30bn, which was growing at around €5bn a year and which the country has to pay. This gap was caused by generous feed-in tariffs that led to fast growth in Spanish wind in the early 2000s.

The problem was compounded by the outcomes of a global financial crash that hit Spain harder than most other European nations, except Greece and Italy.

Neither of those issues has been fixed, and investors are right to worry that they will take a big hit on their investments if they invest in Spain again now. Rajoy has a tough job ahead of him if he wants to win back the industry’s trust. It'll take more than a 6.5GW target.

Which serving prime minister has done most damage to wind?

It’s a tough call. Australia’s Tony Abbott must feature strongly because of his plans to cut the country’s renewable energy target, which is putting projects worth $13bn at risk.

Canada’s Stephen Harper shares many of Abbott’s views on wind
and has slashed pro-renewables policies since 2006. But Canada installed 1.9GW last year, so he hasn't done as much damage.

And the UK’s David Cameron is in the mix too. His pledge to scrap onshore wind subsidies if he retains power in this May’s general election has spread uncertainty and dampened investor appetite.

But none of them outdoes Spain’s Mariano Rajoy, whose government has brought in changes that have paralysed the country’s wind industry. Since he was elected in 2011, he has gradually lowered the country’s feed-in tariffs and, last year, retrospectively cut subsidies for the wind industry.

He has, in short, presided over the paralysis of wind in Spain.

Even so, there is now an indication that Rajoy and his government are now looking to put some life back into a sector they killed.

The Ministry of Energy, Industry & Tourism plans to add an extra 8.5GW of renewables capacity by 2020, including around 6.5GW of wind. It is also set to seek financial guarantees from investors to ensure they complete their projects.

This change of heart in Spain will undoubtedly interest investors, including Spanish firms such as Acciona, Gamesa and Iberdrola that have been forced to focus overseas in recent years.

But our question is how many investors will willingly dive into a market where many investors have already been badly burned by government U-turns on renewable energy.

It is all very well for the Spanish government to seek financial guarantees from investors, but what guarantees will it offer to investors in return? Will it commit to the sector long-term? If it does deals this year then will it still honour them in 2020? These are fundamental questions and investors will need answers before developing in Spain again.

Yes, the country has installed capacity of 23GW and this makes it Europe’s second-largest wind market. However, in our view, it is now effectively back to ‘emerging market’ status. The government
has destroyed trust of renewables investors and must now start all over again. If Rajoy thinks he can flick a switch and — hey presto! — see development, he is wrong.

As the saying goes: trust takes years to build and seconds to break.

Now, we understand it wasn’t simply hostility to wind that led to the government’s previous subsidy cuts. Rajoy and his colleagues wanted to fix a ‘tariff deficit’ of €30bn, which was growing at around €5bn a year and which the country has to pay. This gap was caused by generous feed-in tariffs that led to fast growth in Spanish wind in the early 2000s.

The problem was compounded by the outcomes of a global financial crash that hit Spain harder than most other European nations, except Greece and Italy.

Neither of those issues has been fixed, and investors are right to worry that they will take a big hit on their investments if they invest in Spain again now. Rajoy has a tough job ahead of him if he wants to win back the industry’s trust. It'll take more than a 6.5GW target.

Which serving prime minister has done most damage to wind?

It’s a tough call. Australia’s Tony Abbott must feature strongly because of his plans to cut the country’s renewable energy target, which is putting projects worth $13bn at risk.

Canada’s Stephen Harper shares many of Abbott’s views on wind
and has slashed pro-renewables policies since 2006. But Canada installed 1.9GW last year, so he hasn't done as much damage.

And the UK’s David Cameron is in the mix too. His pledge to scrap onshore wind subsidies if he retains power in this May’s general election has spread uncertainty and dampened investor appetite.

But none of them outdoes Spain’s Mariano Rajoy, whose government has brought in changes that have paralysed the country’s wind industry. Since he was elected in 2011, he has gradually lowered the country’s feed-in tariffs and, last year, retrospectively cut subsidies for the wind industry.

He has, in short, presided over the paralysis of wind in Spain.

Even so, there is now an indication that Rajoy and his government are now looking to put some life back into a sector they killed.

The Ministry of Energy, Industry & Tourism plans to add an extra 8.5GW of renewables capacity by 2020, including around 6.5GW of wind. It is also set to seek financial guarantees from investors to ensure they complete their projects.

This change of heart in Spain will undoubtedly interest investors, including Spanish firms such as Acciona, Gamesa and Iberdrola that have been forced to focus overseas in recent years.

But our question is how many investors will willingly dive into a market where many investors have already been badly burned by government U-turns on renewable energy.

It is all very well for the Spanish government to seek financial guarantees from investors, but what guarantees will it offer to investors in return? Will it commit to the sector long-term? If it does deals this year then will it still honour them in 2020? These are fundamental questions and investors will need answers before developing in Spain again.

Yes, the country has installed capacity of 23GW and this makes it Europe’s second-largest wind market. However, in our view, it is now effectively back to ‘emerging market’ status. The government
has destroyed trust of renewables investors and must now start all over again. If Rajoy thinks he can flick a switch and — hey presto! — see development, he is wrong.

As the saying goes: trust takes years to build and seconds to break.

Now, we understand it wasn’t simply hostility to wind that led to the government’s previous subsidy cuts. Rajoy and his colleagues wanted to fix a ‘tariff deficit’ of €30bn, which was growing at around €5bn a year and which the country has to pay. This gap was caused by generous feed-in tariffs that led to fast growth in Spanish wind in the early 2000s.

The problem was compounded by the outcomes of a global financial crash that hit Spain harder than most other European nations, except Greece and Italy.

Neither of those issues has been fixed, and investors are right to worry that they will take a big hit on their investments if they invest in Spain again now. Rajoy has a tough job ahead of him if he wants to win back the industry’s trust. It'll take more than a 6.5GW target.

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Not a member yet?

Become a member of the 6,500-strong A Word About Wind community today, and gain access to our premium content, exclusive lead generation and investment opportunities.