Investing in Renewables to Tackle Energy Poverty

Globally, the COVID-19 pandemic and energy crisis have increased energy poverty and exacerbated the risk to households of becoming energy poor. Spain is among the European countries most adversely affected by this risk, as it has some of the highest electricity prices in the region. In 2020, energy poverty impacted an estimated 17% of the population, and 10.9% of inhabitants could not properly heat their homes. To tackle energy poverty, regional and local governments have implemented renewable energy projects to reduce the energy burden of households. In 2021, the European project PowerUp kicked off in the Spanish city of Valencia, with a budget of EUR 200,000 (USD 226,480). The project lifts administrative and regulatory barriers and offers tax subsidies to support local solar PV energy communities. In the city of Zaragoza, the Barrio Solar project spearheaded the installation of 100 kilowatts-peak of solar PV plants for collective self-consumption, supported by EUR 350,000 (USD 396,340) in public and private funds. Small businesses and households will benefit from the electricity produced from the project, with 20 low-income households receiving electricity for free.

In the wake of energy price hikes in late 2021, the Spanish government implemented several tax and direct support measures, most of which promote the continued use of fossil fuels. Meanwhile, part of the electricity bill reductions are financed by capping the revenues of renewable energy producers. Two measures adopted in 2021 – a rate reduction in the value-added tax (VAT) (from 21% to 10%) on electricity bills for most power consumers, and suspension of the 7% generation tax – were extended to June 2022. In 2021, the government allocated EUR 202 million (USD 229 million) to support the household heating expenses of Spain's most vulnerable consumers, with discounts covering up to 70% of a household's bill. Transport fuels receive the largest support: a minimum bonus of 20 cents per litre of fuel for all consumers, while freight and passenger transport companies receive additional direct aid.

Source: See endnote 65 in chapter 05.

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