Announcements on earlier this month that the Spanish government was to reduce spending in another sector of the Spanish economy would hardly have made for happy reading on the pages of El Pais and El Mundo. Nevertheless the news was that huge spending cut backs would be made on solar energy with tariffs designed to attract uptake with reductions of up to 45 per cent.

Draft proposals from the Ministry of Industry announced that spending cuts would reflect those seen on feed-in tariffs in Germany and Italy where the tightening of purse strings has necessitated the removal of what are seen as non-essential expenses.

Indeed, Spain will be reducing tariff payments for roof-based systems by up to 25 per cent but for large ground based solar installations a much more eye watering 45 per cent, news not likely to impress installers or investors.

Feed-in tariffs work by offering producers of renewable energy fixed, premium rates for the energy they both use and feed back into the grid. The energy firms are obliged by legislation to purchase the renewable energy at the premium rates the costs of which are spread across Spanish energy consumers. The Spanish government has therefore been able to justify cut backs explaining that they are a means of controlling rising Spanish Energy Bills.

The problems of course is that while consumers may make some savings on their monthly electricity bills, cut backs at this period could cause serious long term harm to an area of the Spanish economy which has been booming over the last decade.

With news this week that growth of the UK solar market has finally over taken that of Spain, it highlights once again the essentiality of tariff mechanisms as a way of creating long term attractiveness for investors in the face of struggling economies.