An opinion paper by the Regulatory Authority for Energy (RAE) handed to the Energy and Climate Change Ministry last week, opens the way for considerable reductions in the tariffs paid to photovoltaic power producers.

According to RAE, the internal rate of return (IRR) at current prices must not exceed 17 percent for roof installations and 12-14 percent for other works, with smaller installations yielding the higher returns.

The proposal is based on data showing that the drop in the cost of photovoltaic equipment has exceeded 70 percent in the last four years, and that the average rate of decline is higher than the fall in guaranteed tariffs (7 percent per six months).

RAE argues that guaranteed tariffs must be updated to reflect this gradual decline in the cost of equipment and installation, the improved efficiency and the higher cost of funding in such a way as to make investments viable and beneficial for the country. Its proposals are as follows:

- For installations under 100KW, the tariff must be reduced from 305.6 euros/MWh to 245 euros/MWh.

- For installations over 100KW, a cut in the tariff from 271.64 euros/MWh to 190 euros/MWh.

- For home installations, a cut from 470.25 euros/MWh to 270 euros/MWh.

RAE’s calculations are based on the assumption of 2 percent inflation, borrowing rates of 9 percent and bank funding covering 75 percent of the cost.

The proposal will enable the government to finalize a package of measures that will address the acute problem of the lack of liquidity in the energy market -- which is also a commitment undertaken to creditors.

This package will include a special levy on already established photovoltaic installations, the suspension of new licensing, a likely tax on home roof installations and a hike in the special levy for renewable energy sources. The measures are considered final and what remains is the exact figures, which will be high, despite the strong reactions of the photovoltaic industry.