Plans to Cut Spain’s Solar PV Feed-in Tariff Put the Industry’s Future in Peril

Jul292010

The Spanish government has recently brought forward rather contradictory policy developments concerning renewable energy sources (RES). On the one hand, the Industry Ministry has presented the country’s National Renewable Energy Action Plan. It foresees that, by 2020, 22.7% of the country’s final energy consumption will come from renewable sources. This is great news, considering that Spain’s RES European Union (EU) target is 20%. On the other hand, the government announced soon after that it would introduce retroactive cuts in the feed-in tariff program for the photovoltaic (PV) industry in the context of the austerity measures the country is currently undergoing. According to this plan, existing photovoltaic plants would have their subsidies cut by 30%, a figure that would go up to 45% for any new large scale plants. Smaller scale roof installations would lose 25% of their existing subsidy, while installations with a generating capacity of less than 20 KW would have 5% taken from their tariff.

It goes without saying that, should these measures be finally implemented, they would put Spain’s 20% RES target in peril and make it practically impossible to reach the 22.7% voluntary target by 2020. In a wider context, this would also strike a deadly blow to the solar PV industry and endanger the development of this type of renewable energy source altogether, which would in turn seriously affect Europe’s transition to a low-carbon economy. The development of solar PV energy in Spain is widely considered to be fundamental to the achievement of an EU-wide low-carbon electricity generation system – a recent study put forth by the European Climate Foundation and McKinsey & Co. determined that, in order to expand the use of RES for electricity generation in Europe, massive amounts of solar electricity will have to be generated in the sunny Southern Europe and distributed across the whole continent.

Not surprisingly, the Spanish solar PV industry has strongly reacted to this announcement and is currently engaged in discussions with the Spanish authorities regarding this issue. It has been reported that the government is considering softening its stand and introducing lighter cuts — not retroactively – meaning that they would only apply to new installations and not to those that already exist. However, this has still not been officially confirmed.

As a company committed to the development of clean energy, we are seriously concerned about the devastating effects these measures could have. Any cuts in Spain’s feed-in tariff scheme for solar PV will lead to a loss of investors’ confidence, something that is simply fundamental for the expansion of this industry and therefore for the development of a low-carbon electricity generation system that contributes to abating climate change and increasing energy security. For this reason, we hope that the Spanish authorities take a more responsible approach towards this matter and keep the current feed-in tariff scheme untouched.

Feed-in tariff schemes are policy mechanisms designed to encourage the adoption of RES and to accelerate the move toward grid parity by guaranteeing purchase prices that are methodologically based on the cost of renewable energy generation. Thanks to this, the competitiveness of solar PV energy has dramatically increased in the last years. It is imperative that such schemes are kept in place until renewable energy sources are in a position to compete freely with traditional sources of energy.

The only way for the RES industry to move forward is through stable and predictable policy frameworks that provide subsidies designed to increase their competitiveness, like feed-in tariffs - in one way or the other. Only this way will the right investments be made and the industry will grow.

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