Is the Sun Setting on Solar Power in Spain?

Plentiful sunshine isn’t the only reason entrepreneurs and industry have flocked to Spain. The Spanish advantage includes abundant land, strong demand for air conditioning, mammoth infrastructural firms to fast-track projects, and, most importantly, generous subsidies. The nation’s feed-in tariffs guarantee 25 years of up to triple the market price for solar energy, making it the world’s hottest solar market, trailing only subsidy-richer Germany as well as the U.S. with its historical lead in developing solar technology.

But obscuring the light are a few clouds.
This month Spain slashed the maximum capacity of solar farms that can claim subsidies from 1,200 MW to just 500 MW. Installed PV capacity has already tripled to 1,500 MW in under a year, should double again by 2010 to 3,000 MW, and more than triple to 10,000 MW by 2020. Spain also cut PV feed-in tariffs by about a third to around 33 eurocents per kilowatt hour. Solar-thermal executives fear the same fate within 24 months as new plants add solar power.

That’s led many companies to mull other markets. Though Spain backpedaled on severe cuts after panel makers balked, companies like Energias de Portugal Renovables are pulling out because of profit worries and, in August, BP shelved plans for the world’s largest solar panel plant in Spain. Critics have warned that when subsidies dry up, so will solar’s appeal. “PV project developers rushed to Spain because subsidies guaranteed returns well above the cost of generating power,” explains Nathaniel Bullard, a solar associate at New Energy Finance. “Cuts will drive developers to other markets with high subsidies.”

Companies are already eyeing the area’s “Club Med” countries where similar feed-in tariffs exist, such as France, Greece and Italy; swathes of sunny Latin America are a possibility; and the U.S. is the ultimate objective as the world’s largest electricity market with abundant potential in its sun-soaked Southwest. Healthy tax credits for solar energy in the U.S., extended for eight years in October are also a draw. Abengoa is already building the world’s largest solar plant, 280-MW Solana, in Arizona.

Scientific American