Abengoa Solar sees little impact from tariff cuts

MADRID (Reuters) - Spain’s Abengoa Solar should not have to make provisions against possible lower earnings from recent subsidy cuts, Chief Executive Santiago Seage said in an interview on Tuesday.

The solar mirror power plant builder and operator expects the government’s draft agreement on reduced sector aid to become law without further regulatory cutbacks.

“We don’t plan to take extraordinary measures like provisions or strategy changes ... we don’t expect any negative surprises in the final agreement,” said the CEO.

Spain’s solar mirror power sector avoided drastic cuts in subsidies from a government desperate to plug a financial hole in its power sector by accepting subsidies for less generation hours and delaying the start-up of some plants already authorized by the government.

“The main impact (for Abengoa Solar) will be the delay in the start-up of some plants ... it’s hard to say how much but it will definitely have an impact.”

A huge rollout of wind and solar power made Spain a world leader in renewable energy but also fueled a multi-billion euro gap between generation costs and electricity tariffs known as the tariff deficit, leading Spain to cut subsidies to the sector.

“In the end the agreement we reached has been good for both sides, good for the government because it allows them to cut the tariff deficit and good for us because it give the security to make investments.”

Although the global financial crisis has pushed governments to sharply cut aid to the renewable sector, it has had little effect on costs in the solar mirror power sector compared with the photovoltaic (PV) sector, which uses solar panels to generate power.

“We’ve see some reduction in prices, but nothing like in the PV sector. Costs per megawatt are between 4 and 5 million but they can reach up to six depending on the kind of power storage system you use,” Seage said.

Sector analysts put the average cost of CSP per megawatt at about 5 million euros before the global financial crisis, about six times more than for conventional gas-fired power generation.

The high cost of CSP makes it unlikely to be competitive with conventional energy until the next decade, and that also depends on reasonable charges for carbon dioxide emissions.

“We see CSP power becoming competitive between 2020 and 2030, depending on a country’s levels of radiation,” Seage said.

Editing by David Holmes