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EconomyEnergyEuropeSpain

Spain’s Energy Transition Underway with Passing of Royal Decree-Law

Upon forming a new government in June, Prime Minister Pedro Sánchez announced his intention to break with the previous administration’s energy policy and move forward in the pursuit of cleaner energy. While the measures may be temporary, the passing of a Royal Decree-Law this month signals the government’s commitment to supporting the development of renewable energy sources.

Spain’s Prime Minister, Pedro Sánchez, has followed through on his promise to propel the country’s transition towards green energy. In late October, the country’s Congress of Deputies approved a Royal Decree-Law that contained a series of energy-related policies, including the elimination of the controversial “sun tax”, which charged residential solar panel owners for being connected to the electricity grid. This initiative demonstrates that the government is committed not only to talking about responsible energy policy but enacting it too.

With just 84 seats in the 350-seat parliament, Spain’s Socialists are in a legislative bind thereby requiring the use of a Royal Decree Law. This tactic allowed the government to speed up the introduction of their energy policy and postpone a parliamentary debate. While the People’s Party was responsible for the introduction of the sun tax, they chose to abstain rather than vote against the law. Unless an agreement can be reached across parties over the decree’s initiatives, the law will remain active until a new government emerges after the next general election.

The Socialist government signalled early on that they planned to chart a new environmental course, announcing their intention to repeal the sun tax last June. Teresa Ribera, Minister for Energy and Environment, stated earlier this month, “This country is finally freeing itself from the great absurdity, scorned by most international observers, that is the ‘sun tax’”.

The sun tax was enacted under the previous administration in 2012 and subsequently stunted the growth of Spain’s promising solar energy industry. Specifically, the law imposed a 7 per cent tax for homes outfitted with solar panels that remained connected to the electricity grid. This meant that a family home with three solar panels paid approximately 70 euros each month to remain connected to energy grid regardless of whether or not they drew any electricity from it.


With 80 per cent of the population living in Spain’s two largest cities, not only do Madrid and Barcelona consume three-quarters of the country’s total electricity, they also have the lowest renewable energy capacity. These metropolises have much to do in the way of becoming more environmentally friendly. Copyright: ivan marc/Shutterstock.com

In theory, Spain ought to be a leading producer of solar energy given its sunny climate. However, the sun tax disincentivised the installation of solar panels, so much so that overcast Germany now produces ten times as much solar energy as Spain.

Additionally, the levy contributed to a mismatch between renewable energy generation and consumption. While Madrid and Barcelona consume roughly 75 per cent of the country’s total electricity, they also have the lowest renewable energy capacity. Over the past few years, wind energy has become the dominant renewable energy source in Spain, but urban environments are ill-suited for this sort of energy generation. Alternatively, solar panels can easily be installed on top of buildings.

However, the Royal Decree-Law goes much further than just the repeal of the sun tax. With a focus on self-consumption, the legislation has eased regulation relating to the registration of new power generations, community renewable energy projects, and has eliminated taxes associated with self-consumed power. The decree also commits the government to creating more recharging points for electric vehicles and has enhanced consumer protection measures for electricity contracts.

Environmental reforms are often derided as being too costly for ordinary citizens. However, these initiatives will actually help Spanish families save money. During the second half of 2017, Spaniards faced the fifth highest electricity prices in the European Union. According to Greenpeace, the self-consumption reforms could save Spanish households as much as 1,770 million euros. Additionally, a discount rate for heating will be introduced alongside the extension of the social-electric discount rate.

The initiatives contained in the Royal Decree-Law are likely to benefit consumers, Spain’s renewable energy industry and the environment. While the policies enacted may only be temporary, their widespread benefits may make repealing them difficult for whichever party forms the next government.

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Katrina Pirner

Katrina is a Berlin-based freelance writer who focuses on economics, disruptive technology and politics. She’s previously worked in Canada, Italy, Belgium, and the US. Katrina holds a MA in International Relations from Johns Hopkins University where she concentrated in European political economy.

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