* Plants installed or under construction not affected
* Tariff deficit 24 billion euros end-2011
* Renewables provide 33 pct electricity demand
(Adds quotes, details, background)
By Andrés González
MADRID, Jan 27 Spain has decreed an end to
subsidies for new generating plants running on renewable energy
sources to prevent billions of euros in debts held by utilities
from escalating, Industry Minister Jose Manuel Soria said on
Speaking after a weekly cabinet meeting, Soria said the
decree would be temporary and not prevent eurozone struggler
Spain from meeting European Union targets for renewables, which
currently provide one-third of the country's electricity.
"First and foremost there is an unequivocal goal through the
government to reduce the deficit and no policy area is apart
from that," Soria said, adding the move would not affect
subsidies for plants already installed or under construction.
Spain's incoming centre-right government has set an
ambitious target of cutting back its budget deficit to 4.4
percent of gross domestic product in 2012 from an estimated 8
percent last year to convince investors its public finances are
Soria estimated the debt accrued by utilities for selling
electricity at regulated rates - dubbed the "tariff deficit" -
stood at 24 billion euros ($32 billion) at the end of 2011.
Of 7.22 billion euros in subsidies earmarked for electricity
production in 2012, he added, 71 percent would go to renewables.
"The biggest problem is the rate at which the deficit will
grow in coming years. If we do nothing, it'll be 3-4 billion
euros a year, so what is an energy problem could become a
financial problem," Soria said.
Instead of passing on the tariff deficit to consumers, Spain
has obliged utilities to hold it on their balance sheets as
The consumer will in principle repay the debt through
gradual hikes in electricity bills, but successive governments
have baulked at burdening people and businesses during the worst
economic crisis in decades.
Soria said Spain would have no problems supplying power
because it already had enough generators to produce some 106,000
megawatts, or more than twice peak demand of 38,000 MW.
In a bid to cut greenhouse gas emissions and its hefty
dependence on energy imports, Spain has become a leading
producer of energy from renewable sources like wind and solar.
Spanish utility Iberdrola has 13,500 MW of wind
generators installed around the world, while renewable firm
Abengoa is building what will be some of the world's
biggest thermosolar plants in California.
Hardest hit will be small producers, particularly of
photovoltaic solar panels, who say they need support to maintain
sorely needed jobs and prevent Spain becoming more dependent on
equipment made in China.
($1 = 0.7601 euros)
(Writing by Martin Roberts; editing by James Jukwey)