Spain taxes renewables, nuclear power producers

Spain has introduced a charge to renewable energy power producers to mitigate the impact of soaring electricity and gas prices on consumers. A similar levy for nuclear and hydropower plants is in the pipeline.

Spain’s wholesale market electricity prices today reached the highest ever recorded level of EUR 189 per MWh. It was an enormous increase compared to EUR 46 per MWh a year ago. According to El Pais, consumers’ electricity bills grew 7.8% in August from a month earlier and 34.9% from August 2020.

Electricity prices all over Europe are driven by a spike in gas and CO2 prices.

The new tax could generate EUR 2.6 billion

The new levy applies to the facilities with an installed capacity exceeding 10 MW and to power plants that don’t receive state incentives. Charges will be EUR 40 per MWh to EUR 80 per MWh, WindEurope calculated.

The tax will be paid if the gas price is higher than EUR 20 per MWh, compared to the current EUR 60 per MWh. This year the level was the lowest in February – EUR 15 per MWh.

In addition, the Government has prepared a tax for nuclear and hydropower plants. According to the Government, those power plants don’t pay CO2 emissions, but they still reap profits due to high electricity prices.

The new tax will last until the end of March and could generate EUR 2.6 billion, media reported. The Government will use the money to help consumers.

Prime Minister Pedro Sánchez: Energy companies are making extraordinary profits now

Spanish Prime Minister Pedro Sánchez said energy companies are making extraordinary profits now.

“It is not acceptable to me because these profits come from the evolution of energy prices,” Sánchez said, El Pais reported.

The Government intends to limit the profits of power plant operators that are not affected by rising gas and CO2 prices as it argues they benefit from high electricity prices.

The electricity tariff was cut to 0.5% from 5.11%. The Government also reduced the value-added tax (VAT) on electricity bills from 21% to 10%.

WindEurope: many wind farms will be closed

WindEurope claims the new charge on wind farms and other non-polluting power plants would close down many wind farms and jeopardize new investments.

The Spanish Government argues high gas prices have driven up electricity prices, and since wind farms don’t have to buy gas, this results in “windfall profits.” However, wind farms don’t sell electricity at spot prices in the wholesale electricity market, WindEurope said, adding that producers sell a lot of power at pre-agreed prices from fixed-term contracts.

There are other available solutions to protect vulnerable citizens

So a wind farm with fixed long-term revenues of EUR 35 per MWh will now lose money on every megawatt-hour it produces. The organization stressed that many would close down because the Government’s measures impose EUR 40 per MWh to EUR 80 per MWh.

WindEurope said the measure would inevitably affect the market and that it isn’t in line with the European Green Deal.

“We fully support the need to protect vulnerable citizens from spikes in energy prices. But EU law allows for alternative solutions to Spain’s ‘gas tax’ on renewables, as other countries show: cutting energy taxes, compensating citizens from state budgets, adjusting regulated tariffs, etc. We look forward to the toolbox the European Commission has committed to provide, setting out what may and may not be done to deal with this complex situation”, WindEurope said.