Spain halts renewable subsidies to curb debts

According to Bloomberg.com, the move is also designed to rein in power-system borrowings backed by the state that reached 24 billion euros ($31 billion) at the end of 2011.

The system’s debts were racked up as revenue from state- controlled prices failed to cover the cost of delivering power.

Costs have swollen in the past five years because of an increase in regulated payments for the power grid support for Spanish coal mines and subsidies for renewable energy plants.

Spain’s industry minister Jose Manuel Soria, said: “What is today an energy problem could become a financial problem,” said in Madrid. The government passed a decree

Spain’s decision is a “first step” to rein in debts, and officials are working on a broader package of measures, Soria said. The nation isn’t planning a levy on hydropower or nuclear plants, nor will it take on power-system liabilities, he said.

The Spanish action follows Germany’s announcement last week that it would phase out support for solar panels by 2017 and the U.K.’s legal battle to reduce its subsidies for the industry.

Spain was an early mover in developing renewables plants, and support for wind energy helped Iberdrola become the world’s biggest producer of clean power, with plants in the U.S. and Brazil. The industry sustains about 110,000 Spanish jobs, according to the Renewable Energy Producers Association.

The government is wrestling with competing priorities as it struggles to convince investors it can meet a target to cut the budget deficit to 4.4 percent of gross domestic product this year, from 8 percent last year, while trying to create jobs in a country where 23 percent of workers are unemployed.