Subsidy black hole means power problems in Spain

Subsidy black hole means power problems in Spain
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The Spanish government has ordered a major overhaul of the energy sector that will cost companies and consumers billions.

The problem is a growing gap between the prices paid for power and the costs of generating it.

Over the last 10 years successive governments have ordered the power companies to sell electricity to consumers at below the cost of production.

Because of those subsidies, there is now a 26 billion euro deficit.

Consumer’s electricity bills will go up – though it is not yet clear by how much – and subsidies paid to renewable-energy providers will be slashed.

Solar energy producers will be hit particularly hard by lower subsidies because they took out big bank loans to built those facilities.

Some could even go bankrupt.

The industry and energy minister said without these changes there would have had to have been a dramatic increase in household electricity bills.

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