Spain 's government Friday said it would slash subsidies paid to renewable-energy providers and raise consumer electricity bills to reduce pressure on public coffers stemming from a large financial deficit in the nation's power system.

The government's planned cuts in regulated costs, including subsidies for renewable energies such as wind and solar energy, will hit solar-energy producers particularly hard because those projects are the most heavily indebted in the renewable sector. Trade associations for solar-energy producers have warned that the government's reduced payouts for renewable-energy generation, which follow previous subsidy cuts since 2010, could spur a wave of defaults in the solar-energy sector.

The overhaul has been months in the making, driven by the government's desire to reduce a shortfall between the costs of the subsidies and running the electrical system, and the sums generated by sales of power to households and businesses--known as the tariff deficit.

To eliminate an annual tariff deficit estimated at 4.5 billion euros ($5.9 billion) this year, Energy Minister Jose Manuel Soria said Spain's government would raise consumers' electric bills by EUR900 million and pitch in another EUR900 million from the state budget. Along with a variety of other measures, the government will slash regulated costs in the electrical system by EUR2.7 billion, he said.

Without such measures, Mr. Soria said consumers' electric bills would have to rise at least 19% this year and ultimately perhaps as much as 40% to cover the tariff gap.

"This reform is not wedded to any part of the electric sector," Mr. Soria said. "We did what we had to do" by trying to distribute the burden fairly to cover the tariff deficit.

By May, a total tariff deficit of about 26 billion euros ($34.06 billion) had accumulated. The government has promised to narrow this shortfall and bring down its overall budget deficit, but also to limit any rise in household electricity bills.

Διαβάστε ακόμα