Italy, Spain plummet in E&Y's renewables index on retroactive cuts

Sep 16, 2014 - Italy and Spain fell to the 15th and 22nd spot, respectively, in the latest “all renewables” country attractiveness index by Ernst & Young (E&Y) after both countries cut support retroactively.

For comparison, Italy ranked 12th and Spain 19th only three months earlier.

The drop for Italy was due to the adoption of a series of retroactive cuts to feed-in tariff (FiT) payments for Italian photovoltaic (PV) projects of above 200 kW. Consultancy E&Y points out that the move will impact around 11 GW of existing solar capacity.

The solar FiT reduction is aimed at saving EUR 1.5 billion (USD 1.94bn) annually, thus allowing the Italian government to cut energy bills by 10%, as promised. In July, however, over 50 companies called on the European Commission to investigate whether the changes are in breach of Directive 2009/28/EC. Appeals have also been filed with the Italian Constitutional Court, while foreign investors may seek redress under the Energy Charter Treaty or other instruments, E&Y noted.

In Spain, the introduction of a cap on project returns hit not only the PV segment, but all renewables. Based on its “reasonable profitability” concept, which came to replace the subsidy scheme, Spain decided to put a limit on earnings for all existing renewable energy plants, translating into a return of some 7.5% over the life of the power stations. As a result, the Spanish government is also facing many legal claims, while some local companies are already fighting to remain solvent.

E&Y pointed out that Spain is “somewhat higher-than-expected” in the country attractiveness index, maybe thanks to the improving economic picture and high asset base. “It will be interesting to see whether distressed deals, subsidy-free renewables or greater European energy market interconnection can rekindle interest in Spain in the years ahead,” the consultancy said in the country attractiveness index report.

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