Spain’s profit clawback plan ‘would harm renewables investment incentive’

A proposed law in Spain aimed at clawing back revenues from emissions-free power plants would create risks for renewables investors and favour fossil fuel-fired generation, according to trade groups that have urged the European Union (EU) to intervene.
The draft law “seriously undermines investment incentives” for decarbonised electricity generation and “reduces the commercial revenues of certain non-emitting companies”, AEL?C, Eurelectric, the European Federation of Energy Traders, the Global Infrastructure Investor Association and WindEurope wrote in a letter sent to the EU last week.
Spain’s government has relaunched the legislative procedure on the draft law for a new regulation on the electricity market that will reduce the revenues of non-CO2 emitting generation facilities installed before 2003.
According to the letter, the aim of the mechanism is to contain, on a permanent basis, the impact of higher CO2 emission allowance prices on Spanish consumers by clawing back “excessive revenues” that have allegedly been earned by certain non-CO2-emitting facilities.
Signatories to the letter said the European Commission should enter talks with Spain’s government and express its concerns over a draft law “that is contrary to the EU framework, including the various Commission Communications, that are aimed at incentivising… decarbonisation, by guaranteeing legal certainty and stability for investors”.
The letter noted that investments in solar, wind and storage happen because companies believe that they can make a fair return on them. Spain’s proposed measure “fundamentally harms that investment incentive and creates additional risk for investors”, the trade bodies said.
They added that the proposed law goes against the REPowerEU plan, which says that windfall profit measures should not affect the carbon price signal from the EU Emissions Trading System.
The news comes after Spain’s government introduced a mechanism last year to limit windfall profits of some renewables plants.
According to the letter, the coexistence of the previous measures with the new proposed law “would structurally damage the badly needed non-emitting generation, whose costs are already raising”. The trade bodies said this “would have the effect of favouring fossil-based power generation”.