Spain has decided to end subsidies for renewable energy projects to help curb its budget deficit and rein in power-system borrowings backed by the state that reached $31bn at the end of last year.

“What is today an energy problem could become a financial problem,” Industry Minister Jose Manuel Soria said in Madrid. The government passed a decree today stopping subsidies for new wind, solar, co-generation or waste incineration plants.

Bloomberg reports that the system’s debts were racked up as revenue from state- controlled prices failed to cover the cost of delivering power. Costs have swollen in the past five years because of an increase in regulated payments for the power grid, support for Spanish coal mines and subsidies for renewable energy plants.

“It’s clear they have to make major cuts,” said Francisco Salvador, a strategist at FGA/MG Valores in Madrid. “The government has already ruled out a significant increase in prices, so the cuts will fall in many places and the spotlight is on renewables, but not just on renewables.”

The Spanish action follows Germany’s announcement last week that it would phase out support for solar panels by 2017 and the U.K.’s legal battle to reduce its subsidies for the industry.

Generating capacity is about twice Spain’s peak demand following a boom in investment in solar panel installations and combined-cycle gas-fired plants, while the country is ahead of its targets for clean power production, Soria said. The suspension won’t affect operating plants or projects that have already been approved for subsidies by the government, he said.

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