From 2000 to 2010, the fastest growing renewable energy source, photovoltaic (PV) solar, has increased from 1.5 gigawatts worldwide to a massive 40 gigawatts. Few countries have featured more prominently in the growing PV space than Spain, in particular during 2008 when the country underwent a boom year and added 2,500 megawatts. Since the boom, Spain’s PV industry has been heralded as one of the greatest growth stories around, however, speaking with Tomas Diaz, Communications Manager at La Asociación de la Industria Fotovoltaica (ASIF—The Photovoltaic Association of Spain) IRJ learned that new legislative moves made by the nation’s government look set to throw a serious twist in the path of Spain’s PV story.
“There are two important changes that the government made since last winter. One was a Royal Decree set in November, which cuts tariffs for future installations: five per cent for small rooftop installations, 25 per cent for big rooftop installations, and 45 per cent—I repeat, 45 per cent—for ground mounted systems,” Diaz says.
“That news means the tariff is too low for ground mounted systems, and we suspect that there will be little or even no market in the coming months and up to a year until PV systems slow down enough for there to be profitability from that tariff.”
On December 24, 2010, the government then published a Royal Decree-Law to put in place a production cap on solar PV plants. This measure includes retroactive conditions on plants registered as RD661/2007 and RD 1578/2008 and controls the maximum amount of hours these projects can operate per year.
How exactly these new legal measures will impact on Spain’s current market cap of approximately 500 megawatts is uncertain, but it is not looking positive.
However, in order to pave the way for a future PV industry in the country, it is also important to identify the many great strengths and benefits on offer, and ASIF’s plans to rectify the damage done.
After the boom
According to Diaz, after Spain’s PV boom in 2008 and the simultaneous advances made in PV development in Europe, a number of problems arose. The government, he explains, expected to add another 400 megawatts by the end of 2010.
“At that time we had 3,700 megawatts—nearly 10 times more and 10 times more cost. The government decided it was too much cost at the current time, given that Spain has economic problems like any other country in Europe,” he says.
“The government has made a lot of decisions in order to reduce debt and budget deficit—one of the moves being the retroactive cap for the tariff to the installations connected during the 2008 boom. That means 90 per cent of Spanish PV already connected to the grid.”
ASIF spoke out strongly following these potentially devastating pieces of legislation, citing media campaigns that exaggerated the real costs of PV solar power in order to turn public opinion toward supporting cutting subsidies, and perceived untruths purported by political figures. The association also took its case to the national and international courts.
“We have complained to the European Union and we are trying to get the Commission to open a process against Spain to go against the laws. Here in Spain there are also some local governments that have claimed nationally to eliminate the retroactive measures because they think they are unconstitutional,” Diaz says.
“But I’m afraid there is no best-case scenario. The courts have a lot of work to do and we expect we will have to wait years in order to see a final solution, and during those years people need to survive. Taking into account the retroactive cap over the tariff is for this year, next year, and 2013, it will take 70 per cent of what you were set to receive.”
“If the courts decide it’s illegal in five years, it’s too late.”
Rather than wait for the inevitable to take place, ASIF is not wasting time in looking to the future of the nation’s PV industry. Drawing on a mix of its geographical strengths, the expertise of individuals in the country, and preventative measures to keep from further legislative backlashes, the group is busy guiding and shaping the future of Spanish PV—whatever adversity it faces today.
Spain’s strong suit
In terms of where the capital, companies and projects will go following the recent legislation pushed, Diaz says, ASIF believes that the sector will likely go abroad where there is more business available in a friendlier environment for operators.
“By our official numbers, in 2009 we only connected 17 megawatts to the grid. In 2010, we connected around 350 megawatts. Thinking back to 2008, where we connected 2,700 megawatts, you can see that the fall of the Spanish PV sector has been very important,” he says.
“The future is that the confidence in stability and strength of government support is not good. Many companies are leaving the PV sector in Spain or even closing because they can’t work with the tariff. In the worst case companies and people with PV plans have seen that the retroactive cut puts themselves in a very difficult situation.”
It’s a story that often attaches to small and startup enterprises; individuals who have posted their homes and assets as collateral to get work off the ground and banks to release funds. Additionally, the lending climate from banking institutions will likely continue to look uncertain—a factor ASIF has already identified and moved on.
“We expect very little growth in ground mounted systems, but we expect strong growth in rooftop mounted systems for two reasons. First, is the financing of that kind of project,” Diaz says.
“As a small project, it is not affected by the lack of confidence the government has put into the market. It’s not the technology, which works fine, that is the problem—it’s support and a problem of cost.”
Secondly, he says, ASIF expects to see more rooftop installations because there isn’t the tariff to get profit for those looking large scale at ground mounted operations. This might be the light up ahead for Spanish PV given recent remarks made by ASIF which state hopes that within a five-year timeframe, many rooftop mounted systems could pay for themselves in terms of power generation.
“That’s one of our great expectations. We think that already in some parts of Spain we have got the potential. It’s better for the consumer to produce your own electricity that to buy it from the utility. We expect that this will happen more in the coming years throughout the country—first in the south of the country with its good conditions and then more in the north,” Diaz says.
“We think that we need a new support scheme to focus on the net metering system to ensure that the consumers benefit and get profit from this sort of development in PV systems.”
Net metering regulation and further collaboration with international PV bodies and the wider industry are both key aspects of ASIF’s aims for the betterment of its sector in the coming years.
A driving force in PV
In light of the turbulent times, Diaz says it is more important than ever to stay focused on future growth.
“We understand that the courts will tell what has to be told about the past, and we need to focus on the future of PV in Spain, for which there are three main points. First of all there is power pricing,” he says.
“The PV Legal Project, a project involving 12 European associations and in collaboration with the Intelligent Energy for Europe Funds from the European Commission, shows that Spain is one of the last countries to develop—going slowly means more cost. An installation in Spain may mean waiting for years.”
Diaz also raises the issues of net metering regulation and further integration of PV technology within the national electricity system. ASIF wants a support framework to assist PV to be in place before this comes about in order to make sure power consumers benefit. These pivotal issues will all be better understood as the effects of the cuts roll out over the coming months and ASIF forecasts that they will really take effect as of the second quarter of this year.
“For the first quarter, we expect that the cap will be full which means more or less 100 megawatts. Depending on the confidence of banks on projects, maybe then caps won’t be so full because people won’t be able to get the project finance,” Diaz says.
“For the second quarter we expect perhaps no PV on ground mounted systems because the tariff isn’t good enough.”
More rooftop installations, more consumer power generation, net metering regulatory advances, more trade abroad and increasing dialogue with European industry are on the way. ASIF has been active, vocal and swift in its reaction to the highly unfavourable cuts and legislation passed in late 2010, and the association is more focused on what needs to be done now in order to support the industry in the years to come. Spain’s PV industry may have incurred a particularly sharp blow of late, but with so many structured goals and strengths to play, it won’t be long before the people driving its industry correct these injustices and rally it back to full strength.