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Spanish Auto-Consumption PV Market Starts to Develop

Tim Murphy, November 5, 2012 (SolarBuzz)

“The increasingly competitive cost of PV electricity has helped open a new market segment in certain regions of Spain: auto-consumption installations that will receive no incentives…related to national regulations in force since December 2011 (Royal Decree 1699/2011)…[that] allow PV installations up to 100 kW to be connected to a consumers interior electricity network…

“…[C]onsumers could benefit from avoiding increasingly expensive electricity purchases…[A] 100 kW installation completed in Q4’12, with the initial cost of €145,000 [would have] a 25-year net present value of €193,000 (NPV, 6% discount rate), and a project IRR of 15%. The electricity purchase price is set to rise at 5% per year, while the project LCOE value is effectively locked from the start. This reflects a typical electricity price (pre-tax) for commercial consumers with a >100 kW service contract and the consumption range of 20 to 500 MWh/year.”

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“While the economics of the proposition may be compelling to commercial consumers that are not currently cash-strapped, the outlook for the new segment is unclear…[while] Spain remains embroiled in [the unfolding and complex Energy Market Reform campaign and the] social, political, and financial crises resulting in low financial market liquidity and low consumer/business confidence…

“The good news for PV is that consumer electricity prices are rising, and may increase significantly in January 2013. The bad news is that PV adoption has been negative based upon recent governmental actions, and the worry is that this trend will dominate domestic PV demand in the short-term…A possible wild card is that the electric companies could embrace the distributed PV applications, and so benefit by delivering the corresponding market demand while also locking in LCOE against their own rising generation and distribution costs. This turn of events would be consistent with market consolidation trends…”

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