EU CUTTING NEW ENERGY CORNERS

Europe Slashes Low-Carbon Energy Subsidies as Budgets Shrink
Jeremy Lovell, July 28, 2010 (NY Times)

"…Spain, Germany, France, Italy and the Czech Republic have all announced [New Energy] subsidy cuts, and there are fears that the United Kingdom, making budget cuts across the board as it desperately seeks to reduce a deficit of over 160 billion pounds, will be tempted to go even further…at a time [the] European Union is committed to getting 20 percent of its final energy consumption from renewables like wind, wave, tidal and solar by 2020 and cutting carbon emissions by 20 percent by the same deadline.

"They are targets that many businesses and certain governments find daunting…[E]conomic growth in Europe will remain weak for several years with low spending power, worsening welfare and rising unemployment…Yet earlier this month, the climate, energy and environment ministers of France, the United Kingdom and Germany [and 20+ leading European businesses with global operations] called on the 27-nation European Union to move unilaterally to 30 percent emission reductions…"

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"…The steep subsidy cuts in Spain are unique. The country is facing a major budget crisis…[and] the country has for years shouldered the cost of the generous subsidies rather than pass them mostly through to consumers…These alone made the Spanish wind sector the fourth-largest in the world after the United States, China and Germany in terms of installed capacity.

"Changes it announced in early July after lengthy consultations with the renewable industry will shave €1.3 billion off the national budget by 2013, largely through a 35 percent cut for the wind energy sector over the next 30 months…It also decided to cap the number of hours that the wind and solar thermal sectors can operate in order to receive premium tariffs…[but] the cap is above the maximum so far achieved…and will therefore have little discernible impact -- always assuming that the cuts stop there."

Doesn't say they can't be revised. (click to enlarge)

"But the Spanish action, coupled with the fact that it also applies retrospectively, is casting a shadow across the continent…particularly in Germany and France [where] the cuts are aimed at future projects and largely at the growing solar sector, where the subsidy had remained unchanged while the costs of solar panels dropped by about one-third over the past year due to oversupply…That created what the governments termed a solar bubble that they felt was about to deflate if not actually burst…The cuts in solar support in the Czech Republic…[still give] a payback on projects of less than 11 years, while those in Italy were seen as still leaving comfortable margins for investors…

"In Germany, which accounts for about half of the world's solar market, the government proposed at the start of the year cutting the subsidies…[11-to-16%]…[In the end] it was agreed that the cuts should be scaled back by 3 percentage points from the July 1 start for three months before going back up to the initially proposed amount…[T]he three-month delay gave the solar industry a slightly softer landing, but that was all, and there was a serious risk of major job losses in the industry as China, in particular, proved to be a cheaper and very willing supplier…[Environmentalists] fear that the cuts, and the potential signal that they give, could be the start of far harsher measures to come -- especially if European economies only manage to dawdle out of recession…"