SPANISH STILL WORKING DETAILS OF F-I-T

Spanish Solar Subsidy Seduces FPL, Scorches Consumers
Gianluca Baratti, May 8 (Bloomberg News)

SUMMARY
Utilities from all over the world have flocked to Spain to build solar power plants because of Spain’s Feed-in tariff (FiT).

The 25-year guaranteed tariff paid to solar energy producers, instituted in 2007, can be 7-to-10 times higher than the rate charged for fossil fuel-generated electricity. The cost-burden for the FiT subsidy to solar, wind, biomass and co-generation power will cost Spanish power ratepayers 4 billion euros in 2009, 40% of each Spanish ratepayers bill.

For their investment, Spainish ratepayers now have ~14,000 megawatts of solar power plant potential in the planning stages. It is the biggest solar energy “pipeline” in the world. The Spanish incentive program drew an investment in the nation of ~20 billion euros in its first year. The growth was so sharp it threatened Spanish financial resources and forced a scaling back in 2008.

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The Spanish incentive became especially attractive as international financial markets caved in and investors sought a growth market.

Spain’s FiT also drove Spanish utility Iberdrola SA and Spanish energy developer Acciona SA to become the world’s biggest investors in wind.

Foreign utilities attracted by the FiT and now building solar capacity in Spain include Florida’s FPL Group and Electricite de France SA. FPL is planning 2 50-megawatt solar power plants in Spain and EDF upped its ownership of Fotosolar, a Spanish PV developer, to 90%. FPL, a big booster of wind and solar in the U.S., also has 2 planned U.S. solar power plants totaling 325 megawatts. It declined to state a preference between U.S. and Spanish incentive programs. Its actions make clear its interest in both.

Spain seems set on raising its grade. (click thru to Global Green's World Solar Report Card)

Even American International Group Inc., the infamous AIG, owned 300 megawatts of solar power plants in Spain before financial circumstances forced divestment.

Spanish energy producer Abengoa recently put a 20-megawatt solar power plant on line near Seville, Spain, and plans a 250-megawatt facility (which would be the world’s biggest solar power plant) near Phoenix, Arizona, for the Arizona Public Service Co. utility.

Neither Spain nor the U.S. gets as much as 1% of its power from solar energy. Spain is building capacity faster, with 3,500 megawatts planned through 2011. The U.S. is second in the world in planned capacity through that period, with 1,750 megawatts in the pipeline.

Statistics on world solar growth can be found in Global Concentrated Solar Power Markets & Strategies 2009-2020 from the authoritative Emerging Energy Research group.

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COMMENTARY
Two things have become very clear about the FiT: (1) It drives growth and (2) it can quickly get out of control.

Spain’s current rate is ~300 euros/megawatt-hour, 7-to-10 times the average rate power distributors pay for coal- or natural gas-generated electricity. What utility WOULDN’T invest in such an opportunity?

The U.S. grade may go up next year, too. (click thru to Global Green's World Solar Report Card)

The current U.S. incentive plan, created by successive stimulus packages late in 2008 and early in 2009, may be approaching the allure of Spain's FiT. It allows a 30% tax credit on the full cost of a system and is available over the next 8 years. The tax credit was, for the first time, made available not only to private owners but to utilities, perhaps in an effort to keep U.S. utilities from taking their investment to Spain and other European nations with an FiT.

Both the U.S. and the Spanish incentive programs cover concentrating solar power plant (CSP) technologies and photovoltaic (PV) technologies. CSP technologies capture the sun’s heat to boil water and drive turbines that generate electricity. PV technologies use solar panels to capture the sun’s light and turn it into an electrical current that is fed into the transmission system.

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Part of Spain’s realignment of its FiT was to reduce the incentive to PV and extend the incentive to CSP throught 2011. Spain now has 7 solar power plants, including 2 50-megawatt CSP plants. Owned by Iberdrola (at Castellon) and Solar Millenium AG/Actividades de Construccion y Servicios SA. (Andasol), the 50-megawatt installations are the biggest such facilities in Europe. Acciona and Heliosolar switched away from PV and are now building CSP. Acciona has 5 projects in development in Spain.

Germany discovered an effective FiT must have a well-designed degression rate and Spain is learning the same thing. (click to enlarge)

QUOTES
- Gabriel Calzada, economist/professor, Rey Juan Carlos University: “Who wouldn’t want to enter a business that’s paid many times more than the market rate, and where the customer is guaranteed for life? [But]…We’re all paying a heavy price for green power…”
- Karsten von Blumenthal, industrial analyst, SES Research GmbH: “The guarantee is more attractive than what other countries offer…Actually the U.S. has better space for solar, in the deserts of California and Nevada.”

The FiT has driven a wind boom, too. (click to enlarge)

- Steven Stengel, spokesman, FPL unit NextEra Energy Resources LLC: “I would not define Spain as more or less attractive, rather it is a new opportunity…”
- Fred Morse, official, Solar Energy Industries Association: “The incentives, if implemented promptly and effectively, should greatly facilitate the financing of these plants…”
- Tomas Diaz, spokesman, Spanish Photovoltaic Industry Association: “All the investment in clean energy in the European Union grew from the summer of 2004, when Brent passed $40 a barrel and was giving clear price signals of a tension that wasn’t going to go away…Cash poured in since 2007 as investors fleeing the subprime crisis in the U.S. looked for a safe haven for their money…”