Dagos power scheme falls flat on its face

The Spanish government has moved to arrest a massive problem in their power industry after maintaining a generous subsidy scheme for the deployment of renewable projects.

Widely seen as one of the most urgent economic challenges facing Madrid, the tariff deficit is the product of the steep gulf between the price of energy paid by consumers and the cost of production. The shortfall has been growing at a rate of about €5bn a year.

The €26bn financial hole reflects not least the generous system of subsidies for the renewables sector that was created by the previous government, and which sparked a boom for solar farms and wind parks across the country. Energy experts warn that at least some of these installations will no longer be able to operate profitably under the new regime. 

“The measures in this reform are not easy for anyone, but they’re absolutely necessary,” said José Manuel Soria, the minister for industry and energy. Without the government’s reforms, he added, electricity bills for ordinary Spanish consumers would have risen by more than 40 per cent.

End customers will still face a 3.2 per cent rise in the price of energy, Mr Soria said on Friday. The increase, coming in the middle of a brutal two-year recession, is likely to emerge as another electoral liability for a government that is already deeply unpopular.

Oh look a government setting the power price, which was far below that which it costs to produce…no surprises it fell over then.



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