THE SUN IN SPAIN HAS MAINLY GROWING PAINS

Solar Industry Learns Lessons in Spanish Sun
Elizabeth Rosenthal, March 9, 2010 (NY Times)

"…Armed with generous incentives from the Spanish government to jump-start a national solar energy industry, [the gritty mining city of Puertollano, Spain,] set out to replace its failing coal economy by attracting solar companies…[Soon it] had two enormous solar power plants, factories making solar panels and silicon wafers, and clean energy research institutes. Half the solar power installed globally in 2008 was installed in Spain.

"Farmers sold land for solar plants. Boutiques opened. And people from all over the world, seeing business opportunities, moved to the city…But as low-quality, poorly designed solar plants sprang up on Spain’s plateaus, Spanish officials came to realize that they would have to subsidize many of them indefinitely, and that the industry they had created might never produce efficient green energy on its own."

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"In September the government abruptly changed course, cutting payments and capping solar construction. Puertollano’s brief boom turned bust. Factories and stores shut, thousands of workers lost jobs, foreign companies and banks abandoned contracts…Puertollano’s wrenching fall points to the delicate policy calculations needed to stimulate nascent solar industries and create green jobs, and might serve as a cautionary tale for the United States, where a similar exercise is now under way."

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"For now, electricity generation from the sun’s rays needs to be subsidized because it requires the purchase of new equipment and investment in evolving technologies. But costs are rapidly dropping. And regulators are still learning how to structure stimulus payments so that they yield a stable green industry that supports itself…[O]ther countries [have] since set subsidies lower and issued stricter standards for solar plants…[and] despite the pain that Spain’s incentives ended up causing, in many ways they fulfilled their promise…The most robust Spanish solar companies survived the downturn, have restructured and are re-emerging as global players…"

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"To encourage development…Europe has generally relied on so-called feed-in tariffs, through which governments pay a hefty premium for electricity from renewable resources. Regulators in the United States have favored less direct incentives like requiring municipalities to buy a percentage of their electricity from companies making renewable energy, although a few cities and states, most notably Vermont, are experimenting with the feed-in concept."

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"…Spain’s [original 2007 tariff]…was the most generous anywhere — 58 cents per kilowatt-hour …In retrospect it was far too high…[I]nefficient, poorly designed plants could make a profit, and speculation in solar building permits was common…Spain’s long-term goal had been to produce 400 [solar] megawatts…by 2010, [but] it reached that milestone by the end of 2007…In 2008 the nation connected 2.5 gigawatts of solar…making it second to Germany, the world leader. But many of the hastily opened plants offered no hope of being cost-competitive with conventional power, being poorly designed or located where sunshine was inadequate… [T]he lavish subsidies inflated Spanish solar installation costs at a time when they were rapidly decreasing elsewhere…

"In Spain, the tariff, now adjusted quarterly, is about 39 cents per kilowatt-hour…Germany’s tariff, 53 cents per kilowatt-hour, is expected to fall at least 15 percent this summer…[B]y next year, Italy will [likely] be the first place where solar generated electricity will not need subsidies to compete…[because if its] abundant sun and sky-high energy rates…Even with the reduced incentives…the solar industry gave Puertollano…a new economic future. Research institutes there are developing cutting-edge technologies. Unemployment, though now up around 10 percent, has not returned to the 20 percent figure. The city is home to a number of solar businesses: a new 50-megawatt thermal-solar plant owned by the Spanish energy giant Iberdrola created hundreds of jobs…"