Abu Dhabi sues Spain over cuts to renewables

The emirate of Abu Dhabi is suing Spain over its decision to reduce premiums for solar thermal energy (STE) production as part of its review of state aid to renewable energies.

This is just the latest complaint brought against Spain by foreign investors who say the decision to cut premiums constitutes legal insecurity and expropriation. The Washington-based International Center for the Settlement of Investment Disputes (ISDIC) now has five cases against Spain on its books, four of them involving renewable energy.

In October 2011, King Juan Carlos and Sheikh Mohammed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi, presided the inauguration of the Gemasolar STE plant in Fuentes de Andalucía (Seville province). The event was attended by several members of the Abu Dhabi royal family and ministers from both countries.

The plant is operated by Masdar, a branch of Mubadala Development Company, the sovereign fund of the emirate of Abu Dhabi. Masdar Solar & Wind Coöperatief U. A., a group unit based in the Netherlands, on Tuesday lodged a request for arbitration with ISDIC.

Masdar Solar partners in Spain with Torresol, an STE company. The Gemasolar plant has the capacity to supply 27,500 homes with electricity, according to the company. Total investment in this and two other plants is close to a billion euros.

In response to an earlier suit by 14 photovoltaic renewable energy producers who complained that the Spanish government has unfairly changed the rules of the game, in late January the Supreme Court ruled that the cuts did not infringe the legal security of investment and were justified by the need to trim the tariff deficit (the difference between what utilities claim it costs to produce electricity and what they may charge customers).

The cuts also aim to reflect declining costs for the industry in recent years. The Popular Party (PP) administration of Mariano Rajoy is also preparing limits on premiums to wind farms.

The government estimates that the reforms will save the state coffers 1.75 billion euros. Under the previous system, total premiums paid out between 1998 and 2013 are estimated at some 50 billion euros. The increase in funding between 2005 and 2013 was 800 percent.

The cuts began under the previous government of Socialist José Luis Rodríguez Zapatero, and sought to address the glut of photovoltaic plants built in Spain because of the high rewards for this technology.