Feb 19 2014, 4:21pm CST | by Forbes
On Wednesday, Masdar, which invests in renewable energy projects for the sovereign fund of the emirate of Abu Dhabi, became the fourth major investment fund to sue Spain for slashing solar thermal energy subsidies.
In November, RREEF Infrastructure, Deutsche Bank’s asset management division based in Frankfurt, and Antin Infrastructure Services , an infrastructure investment fund based in Paris, sued Spain over the subsidy cuts.
The following month, Eiser Infrastructure Partners , an independent equity fund manager that owns a majority stake in two 50 megawatt solar-thermal plants, became the third investment fund to sue Spain.
The lawsuits, which were filed with the International Center for the Settlement of Investment Disputes , claim that Spain’s decision to reduce premiums paid for electricity produced by solar thermal amounts to an act of expropriation – or, wrongful government appropriation.
The size of the subsidies paid annually, which amounted to about $68 billion between 1998 and 2013, had increased by 800% between 2005 and 2013.
In January, Spain’s Supreme Court ruled that the subsidy cuts did not infringe the economic rights of 14 solar power project developers.
The Supreme Court concluded that the cuts were necessary to reduce the tariff deficit, which refers to the difference between what utilities claim it costs to produce electricity and what they actually charge customers.
The Spanish government has estimated that the reforms will reduce the tariff deficit by nearly $2.5 billion.
The surge in subsidy-related litigation is likely to erode investor confidence in renewable energy projects that only pencil with subsidy support, especially if those subsidies are based on performance rather than capacity.
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