Tag Archives: Solar

Spanish Scandal Could Force Energy Strategy Change

ImageAfter a turbulent first year of cuts aimed reducing a crippling deficit, Spain’s energy sector could see a shift in direction as a corruption scandal threatens the current conservative government.

Since taking office after early elections just before the New Year in 2011, the government led by Prime Minister Mariano Rajoy has led a campaign of cuts and adjustments meant to drive down an energy sector deficit that greeted them around $30 billion.  Attributing the daunting amount to unsustainable government subsidy programs, Rajoy and his Minister of Industry, José Manuel Soria set out a series of cuts that have spurred appeals to the European Commission and lawsuits from investment firms.

However, the fate of Mariano’s party leadership in Madrid has recently been cast into doubt amid allegations that senior officials had received secret cash payments after the practice was made illegal in 2007. Rajoy denied any wrong-doing following an extensive report published in Spain’s national daily, El Pais detailing payments to him as late as 2008. The El Pais report was quickly followed by calls for Rajoy’s resignation and denials from party officials.

While it is not yet clear whether a return to the Socialist leadership that led the country for eight years before Rajoy would signal a change in pace, it is even less clear whether voters would hand the reigns back to the left should the conservatives be forced from office. Recently, both of the country’s largest political parities have seen support erode thanks to their handling of the economic crisis. On the local level, this has allowed support to shift to smaller, less centrist parties.

However, even if Rajoy remains in power – which regional observers expect he will – the government’s approach to the energy sector will likely see a change in the New Year. Despite the government’s cuts and general deficit reduction strategy, the energy sector’s deficit has continued to rise in recent months casting doubt on their approach. While Soria and company predicted a slowdown as a result of the cuts, which have focused on solar and wind subsidies; the deficit has actually grown at double the expected rate. Soria has signaled a different approach in the coming year and insisted once again that further cuts will not include retroactive actions.

This expected reversal reflects a broader trend in Spanish economic improvement, which has largely relied on cuts in spending and services across the country’s seventeen communities. With unemployment continuing to rise and economic growth stagnant, Madrid and Brussels alike have suggested an approach that does not focus so much on austerity and may include additional efforts aimed at growth.

Image: Iberosphere.com

Originally Posted: Newsbase Euroil Monitor

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Italy’s Elections Offering Few Energy Specifics Beyond More Local Control

Europe-scrambles-to-save-euro-markets-surge-N1L45LK-x-largeAs Italy prepares to go to the polls after months of frustration about tighter government spending policies and slow recovery, the country’s energy sector faces a wave of uncertainty as candidates hint at solutions, but offer few specifics.

The late February elections present a stand off between supporters of an increasingly unpopular technocratic government led by Mario Monti and critics of his tighter belt approach, led by a newly resurgent Silvio Berlusconi, or as the Christian Science Monitor described it, “the populism of short-term fixes and the long-term reforms necessary to make Italy’s economy solvent, competitive, and sustainable over the long run.

So far, leaders of all sides have hinted at what the country could see as far as expanding an energy sector that is largely dependence on foreign resources for oil and natural gas. After a reversal of an offshore drilling ban late last year, Monti unveiled plans to more than double domestic crude production, suggesting increased development of local resources in favor of expensive and uncertain imports. Similarly, the head of the center-left alliance, Pier Luigi Bersani said he would emphasize domestic reserves with a concentration on natural gas and a further reduction of state support for renewable options, according to Dow Jones. For his part, Berlusconi has offered few specifics, but does bring with him deep ties to Russian producers and affection for a nuclear return in the country.

More than a specific threat to Italy’s energy sector, the country’s national elections are proving to be a source of concern to the economy and investors in general. Despite recent declines in borrowing costs, after a series of painfully high auctions, Italy has seen investors grow skittish about the future or at least about the instability that could accompany a political transition. At the heart of this are critics of the current administration’s strict spending cuts and tax reforms, introduced in an attempt to reduce stress on the economy, with many taking aim at the appointed leadership of Mario Monti. While a full return to power by Berlusconi is not expected, the former prime minister’s ability to block a full parliamentary majority could shatter confidence about Rome’s ability to stay the course and scare off nervous investors. However, even if a Democratic majority is achieved, some have suggested that their policies may prove to be just as destabilizing.

“I’m investing in the euro zone but not in Italy, because although they have a primary surplus, there’s huge uncertainty politically,” Torgeir Hoien, head of fixed income at $19 billion Norwegian investment firm Skagen told Reuters.” What kind of policies will the Democratic Party pursue if they win?”

Originally Posted in Newsbase’s Euroil Monitor

 

 

 

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Spain’s Energy Sector Dodges Deficit Pressure

As Spain’s new government struggles to deal with an energy deficit before it begins to affect investor confidence and the country’s overall borrowing costs, the country’s varied production sectors have come under new pressure.

Although much of the spending cut attention over the last month has centered on Spain’s renewable sector, with subsidies on new projects halted in later January and reports suggesting further action on even existing projects, solar and wind are not the only energy sectors coming under closer scrutiny by the government. Facing a 24 billion euro energy deficit, accrued over the last few years thanks to poor subsidy planning and domestic energy prices that did not reflect new pressures, the new Industry Minister Jose Manuel Soria has stated that the cost of closing this funding gap must be shared throughout the country’s energy sector.

The energy deficit reduction goal is especially important given the fact that the amount is not currently included in national figures, but would be if not dealt with soon. Spain is currently dealing with EU pressure to reduce the overall deficit to 4.4 percent of GDP in 2012, though the new government has conceded that it will more likely only reach 5.8 percent given the impact further cuts would have on the struggling economy.

However, the last two weeks have seen a heavy push back from both the country’s utilities and lobbyist representing Spain’s oil and gas actors. Intent on shifting the burden of the overall costs away from traditional energy resources, leaders have coordinated pressure on Soria, though analysts have stated that the pressure is sure to be felt throughout the energy sector, especially given the overlapping roles of energy and utility companies. For example, Spanish utility Fenosa was bought by Gas Natural in 2009, which is partly owned by oil and gas giant, Repsol.

For now, Soria and the new government still have the opportunity to look beyond their own budgets for aid, including the possibility of tapping into European Union funds to help expand the country’s much-needed grid connection program. Long delayed thanks to opposition from French industry and political leaders, Spain’s natural gas pipeline connectivity to the north will likely be addressed in a new EU energy grid plan to be released later in the Spring.

Image: http://www.renovablesverdes.com

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Spain’s Energy Future Under Rajoy

As Spain prepares for the return of a Partido Popular government this month, under the leadership of incoming Prime Minister Mariano Rajoy, calls for greater clarity about policy decisions have become more pronounced and the country’s energy sector is no exception.

Swept into office in late November with a significant and clear Parliamentary majority, Rajoy and the PP were able to win without many specific details about their plans thanks in part to the deeply unpopular standing of the incumbent PSOE and outgoing José Luis Rodríguez Zapatero.  However, with the November 20th early elections out of the way, demands for a clear path forward are becoming more pronounced, including what the incoming government will do to address the country’s energy sector. While details remain vague, it appears that a PP government will provide a shift in industry priorities and financial support and fewer government regulations.

Long recognized as a leader in renewable energy efforts, Spain will likely see a reduction in attention and investment as the PP has promised cuts to government subsidies for solar and wind projects. Unlike fellow renewable leaders in German and Portugal, Spain did not pass the cost of renewable subsidies on to consumers, instead relying on state funding and the sale of government bonds, which has become unsustainable in recent months.

To compensate, Spain’s PP have signaled that they will push for less regulation over the country’s nuclear efforts, allowing plants to remain open for as long as they are deemed safe. In regards to more traditional efforts, the PP have stated that they will push Europe to allow for greater Spanish access to the European power grids, especially in terms of the country’s access to oil and natural gas pipelines into France. Meant to address the current narrow lines of transport, the push would establish Spain as a more dependable entry point for North African reserves into the European market, though they will have to overcome a long history of resistance from France.

The PP has not yet expressed support or concern about the growing shale efforts in Spain, anchored by new projects in the country’s northern Basque Country, though the PP’s aversion to greater regulation suggest less support for the sort of official push-back similar campaigns have seen in Germany, France and the UK. In more immediate terms, the government will likely to support an Energy Ministry push to compensate one of the country’s largest energy actors, Gas Natural, for legal fees accrued during a pricing dispute with Algeria’s Sonatrach to the tune of 157.3 million euro.

 

 

 

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