The rain in Spain falls mainly on the “green economy”
The Wall Street Journal reports on the sad end of Spain’s immense green-energy subsidies, which the beyond-bankrupt government is preparing to cut:
Juan Antonio Cabrero is bracing for the savings he invested in a solar-energy farm in northern Spain to disappear into light.
In 2008 Mr. Cabrero put up his €20,000 ($26,200) life savings and took on a €80,000 bank loan to buy part of the solar farm, pledging his home in nearby Tafalla as a guarantee. Spain’s government was promising more than two decades of large subsidies to spur the growth of solar energy, and Mr. Cabrero thought his investment would safely provide a nest egg for his planned retirement in 2018.
Now, because of cuts in renewable-energy subsidies the government is said to be planning, the 60-year-old Mr. Cabrero may lose both his savings and his house.
“I feel cheated, misled and assaulted by my own government,” said Mr. Cabrero, who works in sales for a company that builds hybrid-electric buses. “I never would have done this if I had known what would happen.”
That’s one of the worst things about the centrally planned subsidy state. Government involvement brings an illusion of stability, a promise of guaranteed return. The same sort of thing happens in the United States, although we don’t yet have a lot of middle-class people gambling their homes and life savings on the absurd “business models” that allowed President Obama to line the pockets of his top contributors with taxpayer loot. Green energy scams are largely a billionaire’s game in these parts.
Spain’s only talking about cutting their green subsidies back by 10 to 20 percent, but the business plans of these parasite industries are so shaky that even a ten percent loss of government subsidies spells doomsday:
Deputy Energy Minister Alberto Nadal told representatives of Spanish and foreign banks late last month that the government was planning to cut the level of government-guaranteed revenue for renewable-energy production, a government-guaranteed payment that effectively acts as a subsidy because it is far above market rates, according to people briefed on the meeting.
Bank executives present at the meeting argued that they shouldn’t have to foot the bill for the energy overhaul by assuming any resulting losses, a senior Spanish banker said, adding that Spanish banks are still lobbying to soften the planned cuts.
Those government subsidies increase the costs for running the nation’s electrical system. For years, the subsidies and other overall costs of running the system have been higher than the amount of money generated by actual sales of power to households and businesses, resulting in a “tariff deficit.” Reducing the tariff deficit helps cash-strapped Madrid’s fiscal picture because the government likely would have to devote less money to filling that gap in future years.
Spain’s electricity system has registered deficits during most of the past decade. By May, the total accumulated deficit had reached about €26 billion ($34.04 billion). The government has promised to narrow the annual gap this year as it struggles to bring down its budget deficit and limit the rise in household electricity bills.
Such is the magic of green socialism: the little guy pays extra for his electricity so well-connected bankers and rent-seeking solar-panel moguls can make money. There have already been legal threats from international investors looking to protect their “profits.” If your “profits” vanish because government subsidies are cut by twenty percent, you’re talking about loot, not profit.