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Renewable Energy Regulatory Risk Highest In Spain And Italy

The greatest regulatory risk for renewable energy investors in Europe is in Spain and Italy, while France, Germany, and the UK have relatively strong regulatory frameworks.

These are the conclusions from a new report published by ratings agency Moody’s Investors Service, which investigated the regulatory strength across the European Union.

“In Spain, the government has on several occasions made adverse changes to the subsidy regime for existing renewable energy producers in order to eliminate a shortfall in the revenues of the electricity system relative to its costs,” said Christopher Bredholt, Moody’s Vice President — Senior Analyst and lead author of the report. “This allowed it to curb the so-called tariff deficit without significantly increasing end-user electricity prices, a politically unpalatable option at a time of high unemployment.”

In the press release accompanying the launch of the report, Project Finance: Regulatory risk for EU renewables investors greatest in Spain, Italy, Moody’s claimed that EU government subsidies were responsible for much of the renewable energy output, saying that without these subsidies much of the renewable energy output “would not be viable.” Of course, in recent months we’ve seen the continuing decline of renewable energy costs, bringing some technologies closer to grid parity than ever before, suggesting that Moody’s has somewhat overstated the role of subsidies across Europe as a whole (no doubt in some countries they are right on the money).

Quoting now from Moody’s press release:

“In Moody’s view, renewable assets in countries where green subsidies account for a high proportion of household bills, where political and popular support for the green agenda is low, and where governments are reluctant to pass on the full cost of their renewable schemes, are at greater risk of future adverse changes to their cash flows.”

Changes in national regulations are going to have a massive impact on the ability for renewable energy to repay debt financing, as in Spain and Italy where new taxes are set to do just that, or what Moody’s describes as “an outright retrospective change to the incentive regime” being seen in Spain, Italy, the Czech Republic, and Greece.

Moody’s suggestion that the UK is one of those contrasting nations with a strong regulatory framework also seems to go against the grain of recent developments in the country, with numerous policies up on the chopping block set to slash subsidies for solar, onshore wind, and other small-scale renewable energy technologies.


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