After retiring from a long career at IBM, Spain's Angel Miralda poured his savings into a small solar farm in the hilly northern region of Huesca, encouraged by government promises of stable returns.
Now Miralda fears a new government energy policy will deepen cuts to renewable energy subsidies, wipe out his savings and push his business over the brink.
Small-scale photovoltaic (PV) energy producers like Miralda started investing in solar panels when the government was offering lucrative subsidies under a decade-long drive to become a global leader in green energy.
But a prolonged economic recession and a yawning budget gap forced Madrid to pull back its support for renewables, and more cuts are on the way, threatening major losses on personal investments and even defaults on bank loans.
Banks financed 80 percent of a total 25 billion euros ($33.5 billion) invested in PV installations in Spain, according to industry association ANPIER, of which Miralda is one of about 4,300 members.
While big companies also raced to develop wind and solar technologies, the vast majority of PV investments were by small-time savers.
Miralda made a down-payment on a solar farm in Benabarre, Huesca, launched as a cooperative with eight other investors in 2008 when government-guaranteed returns on investments were more attractive than sovereign bond yields and an unpredictable stock market.
His local bank put up 70 percent of the financing.
"I decided to do it because it seemed like a safe, profitable investment backed by the government. I'd always been interested in energy, and I thought it was a good way to help our country's economic development," Miralda, 65, told Reuters.
"I trusted the terms laid out in the 2007 law," he said, referring to the royal decree that became a cornerstone for PV investments before successive changes to the law that have dented revenues by 40 percent.
The royal decree guaranteed regulated revenues of 450 euros per megawatt hour, but with 3,861 MW of PV capacity in 2010 - 10 times the government's goal - it started to limit entitlement to incentives.
Now Miralda says revenue from his solar farm is not enough to cover payments on his loan, which is backed by his home, or the maintenance on his 500-kilowatt installation.
Further cuts expected by mid-July could be critical.
"The situation is delicate. If there's another cut I don't know what we'll do," Miralda said, echoing the concern of thousands of Spanish PV investors, many of them farmers.
NO RECOURSE
Unlike the large foreign funds that have initiated legal action against Spain for changing solar rules, under Spanish law domestic investors have no legal recourse because the changes were passed by executive decree.
_0">Instead they have launched an internet platform called Nuevo Modelo Energetico with the support of attorneys, renewable associations and political parties to protest their plight in Spain and Europe.
_1">"The government encouraged us to invest, and now they're changing the rules in the middle of the game. In any other business, contracts have to be upheld, and in this case one of the parties is our own government," Miralda said.
_2">Spanish Industry Minister Jose Manuel Soria has argued he had no choice but to put a cap on incentives that led to an uncontrolled PV bubble.
_3">Other European countries are also struggling to reconcile years of heavily subsidized growth in renewable energy with current overcapacity and tight finances. But some, like Germany, have considered scaling back future incentives rather than changing the terms for existing projects.
_4">Years of government support for renewables are largely to blame for a current 26 billion euro deficit in Spain's power system that the European Union has called on the country to erase as it struggles to keep public finances under control.
_5">Soria must cut 4 billion euros from annual power system costs to keep the tariff debt from growing, but recently said he would spread the pain across sectors and wanted to ensure "reasonable returns" on investments by linking subsidies to sovereign borrowing costs.
_6">Spain's large utilities also invested heavily in renewable energy projects and face a hit to earnings from a fresh round of cuts due by the middle of July. But the pain for small investors will be felt closer to home.
_7">"We have to pay back those loans no matter what, even if it means selling our land," said Ramon Salvia, a 46-year-old agricultural technician who stretched his savings to join 11 other partners in a 5 million-euro, 600 kw solar farm in Linyola, northeast Spain.
_8">"It's a question of pride," Salvia said.
_9">($1 = 0.7461 euros)
_10">(Writing by Tracy Rucinski; Editing by Fiona Ortiz and Will Waterman)
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