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After a period of increasing optimism in the renewable sector, which has generated a new wave of green field projects, M&A activities , renegotiations of contracts and new auctions in which we are playing an active role advising our clients, the new Secretary of State has come up stating that the theoretical profitability of 7.39% for renewables generators will not be maintained in the next regulatory period. Instead these may be reduced according to the evolution of the profitability of the 10-year Spanish bond, which would yield a return, at the moment, of around 4.3%. 

After a meeting held by the Secretary of State for Energy with representatives of the photovoltaic sector, the Government assumes that the profitability of renewables facilities will vary according to the yield of the bond, confronting the argumentation that 7.39% was frozen for the whole technical lifespan, as established in the Additional First Provision of Royal Decree-Law 9/2013.

Before this alarming news, internally we have held several urgent conversations in the office, as well with several representatives of the sector, to decide how to act, with a worrying feeling that "we are back to black". First of all, we need to put up a fight in order to achieve that these Government intentions never see the light in any legislative form. There are legal arguments enough to doubt whether this can be approved for the new regulatory period without passing through the Spanish Parliament, as the differential rate of the remuneration must be approved by Law, as established in Article 19.2 of Royal Decree 413/2014.

In case the proposal were  approved, it would be necessary to re-analyze the legality of the remuneration system at the light of this new perspective. It is crystal clear that with this in force it would be impossible to determine ex ante the profitability of any project, making these  unbankable and thus creating an economic nonsense. Because of this, we will have to re-inform the European Commission about the confirmation of this fear, where 7.39% may or may not remain in the following regulatory periods and, consequently, exhaust all available national remedies, at the light of these new developments.

We sincerely hope that the Secretary of State rectifies and everything comes back together at its place, in a moment of growing activity in the sector, and in which the only thing desired is regulatory stability. We are already missing the dyas of just having a lame duck caretaker Government, which could not betray the legitimate expectations every now and then.

As usual, we remain at your service to comment the latest news.

 

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