Spain and Italy reduce feed-in tariffs

Spain and Italy reduce feed-in tariffs

Investors in photovoltaic systems in Spain need to prepare for significantly lower rates of return. The Spanish and Italian governments have decided to reduce the feed-in tariffs for renewable energy systems. Both countries may face legal action by operators and investors over the retroactive regulations. Investors in Spain have known for one year that they will need to prepare

Investors in photovoltaic systems in Spain need to prepare for significantly lower rates of return.

The Spanish and Italian governments have decided to reduce the feed-in tariffs for renewable energy systems. Both countries may face legal action by operators and investors over the retroactive regulations.

Investors in Spain have known for one year that they will need to prepare for significant cuts. The Spanish government has now completed the paradigm shift that it began in July 2013. Under the new regulation, a system should provide a return of 7.5% over a service life of 30 years. This will be achieved by providing a fixed annual investment bonus and an additional payment of 2.5 Ct/kWh on top of the market price for electricity. Up till now, energy from renewable sources was subsidized with a fixed remuneration, which meant that the return on investment was significantly higher in many cases. While the original regulation was only applicable without restrictions for two years, legislators have announced that the first evaluation of the new rate of return will be in five years.

In Italy, feed-in tariffs for solar installations with a capacity of more than 200 kW that were assured under the Energy Act will now either be reduced by a flat 10% or the funding will be redistributed over a subsidization period that has been increased from 20 years to 24 years. The purpose of these measures is to reduce energy costs for mid-sized companies. Investors should make preparations for the fact that the conditions for receiving feed-in tariffs in Italy will change, according to Roberto Pera, a partner at Rödl & Partner in Rome: “A final decision on the new regulation has not been reached yet. Nevertheless, the reliability we have seen up till now is beginning to crumble.”

The lawyers at Rödl & Partner in both countries agree that this retroactive infringement of investment security will not stand up in international arbitration courts. The firm in Spain is already helping its clients to protect their investments against retroactive regulations in court. There might be legal action in Italy as well. “We recommend that the companies involved wait for the law to be passed and then decide on appropriate action,” says Svenja Bartels, a partner at Rödl & Partner in Padua.

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