Spain’s decision to halt FIT contracts will hurt cogeneration business

Faced with a serious economic deficit, the new center-right Spanish government has acted to temporarily put a halt to awarding new feed-in tariff (FIT) contracts starting in January 2013, and cogeneration companies will be affected.

The change was passed as part of Royal Decree-Law (RDL 1/2012) in January 2012 and it will prevent proponents of new cogeneration, renewable energy and waste-to-energy plants from receiving contracts to sell their electricity to the grid, effectively putting the domestic RE industry on hold while the government drafts a new strategy for the electricity sector.à‚ 

The move is expected to have immediate impacts on approximately 4,500 MW of wind power projects, 550MW of solar PV projects, as well as a number of projects in other technology classes.

The main driver behind this decision is addressing the country’s electricity system deficit, which stands at over €24bn. Compounding the problem is that electricity demand in peninsular Spain has been declining since the global financial crisis of 2008, resulting in significant excess generation capacity.

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