Spain facing Solar pain

The solar industry in Spain is shaking as an after-effect from the Spanish government’s new regulatory framework that will decrease the subsidized tariffs for ground-mounted solar energy projects by 45%. As expected, this will be enough to kill  future investments in the trade.Not to forget the job losses as investment moves outside the country.

Background

Spain was hit with one of the biggest recessions in its history. The country still needs to completely recover from the negative growth and at the same time confirm to deficit targets set by the European Union.

Not surprisingly, the government wants to cut renewable subsidies that amounted to  nearly  €6.2bn in 2009. Around 50% of that amount went to the solar power industry, to meet only 2% of Spain’s power needs.

Regulatory supporters also question the continued subsidy support on the basis that Spain now meets nearly 39% of its energy needs from renewable energy compared to the 47% goal till 2020.

There have also been claims of “fraudulent” management of state subsidies.

Result

As a result of regulatory uncertainty over the last one year , the solar industry in Spain has seen installation of only 100MW of generating capacity in 2009 and 2010 – compared to 2,700 MW in 2008.

The industry is so frustrated that it has sued Spain’s government, arguing that that new regulation is way too harsh and even “unconstitutional” as the tariff cuts are expected to apply to both new and existing projects, meaning the industry may have to make retroactive payments.

On the other hand, if the regulation supports the industry, the government could see proceeds of ~€14bn from reduced need to import energy from neighboring countries, CO2 reduction benefits, higher tax revenues, labor social security contributions and other energy distribution and transport savings.

Companies have started looking at opportunity growths in other countries especially in upcoming solar countries that could make use of the Spanish companies know-how and technological expertise.

Outlook

Not all is lost for the solar industry. The tariff cuts for rooftop projects are not very substantial and these projects could still attract investments.

Rooftop projects are expected to touch 35 MW of capacity installed this year with further expectations of surging to 250 MW in 2011 and 260 MW in 2012.

Acoording to Greenpeace “Spain’s government is making a historical mistake by deterring investments in the country’s photovoltaic industry because the economic, employment and CO2 emission-reduction benefits will now go to other countries.

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