Spain proposes up to 45 percent PV FIT cuts; analyst tells pv magazine not all is lost though

A statement from the Industry Ministry confirmed the government aims to cut feed-in tariffs (FITs) for ground-based solar PV panels by 45 per cent, while also reducing support for large roof-based systems by 25 per cent and small roof-based systems by five per cent. This statement was supported by Stefan de Haan, senior PV analyst at the iSuppli Corporation, who told pv magazine that problems with the governmental budget have impact directly on PV subsidies “and that’s why they announced pretty tremendous cuts for 2011”.

The draft proposals, continues the Guardian, which mirror similar cuts recently announced in Germany and Italy, have been sent to Spain’s energy regulator for consultation. The move was announced after talks between the government and energy firms over the scale of the cuts reportedly broke down last week. The government has argued that the falling cost of solar panels means that the industry will be able to cope with reduced levels of support, and there were even suggestions that ministers could try to apply retroactive cuts and reduce incentive payments for existing solar PV installations in an attempt to curb rising Spanish energy bills.

The latest proposals only apply to new installations, continues the Guardian, but industry insiders have warned that the deep cuts could harm the development of Spain’s booming solar industry. A deal agreed between the Spanish Wind Energy Association, solar thermal power plant trade association Protermosolar and the Ministry of Industry, Tourism and Trade resulted in relatively modest cuts to subsidies that will be phased in over three years.

Hope for Spanish PV, but not before the problems are ironed out

Although the outlook for Spanish PV is less than positive for the next couple of years, de Haan said he expects to see the market recovering by 2014/2015. He explained: “Our [iSuppli’s] assumption for the Spanish market for the next two years is that they will not grow beyond the 2010 level, perhaps even shrink a little, so something in the order of 500 megawatts (MW) plus or minus is what we can expect in Spain, so it will remain rather flat.”

He continues: “The general support for renewable energy sources in Spain is problematic – they are committed to the European Union (EU) renewable energy target so something like 20 percent share of renewable energy in 2020, so in principle, they must do something there. On the other hand, we have the really critical financial problems – the government has to cut its general budget, we have over capacity in terms of energy. Electricity generation in Spain is so completely unlike in Italy: in Spain, we have, I think it’s mainly the gas plants – they run right now at very low utilization, at 50 percent or so, so there’s really no direct motivation now for the government to strongly support PV and that’s why the development of the whole market for the longer term future is now a bit shifted.”

He goes on to say that in order for the region to recover, it is necessary for the government to look at the long-term future of PV. He told pv magazine: “The suggestion for the government of course would be that PV is a future key industry and you should somehow support your local producers and just try to build this industry, just like the other countries.

“They would really have to think now and plan for something that plays a role in 2015 or so when PV has grown and has a much higher importance for global economy and they would have to think in these timescales. But, right now they are fighting with their budget problems. And there are even some people afraid that Spain will become the next Greece concerning the governmental budget crisis and this of course would mean that, something that is more or less indefinite in a green future would be cut – no doubt about that – so the direct outlook for PV in Spain is such that the industry cannot expect really strong governmental support, probably never in the future and that’s why it just takes longer until this market recovers. PV has to make sense from an investors point of view, on its own, without subsidies; that is electricity generation must become cheaper through PV, but as prices in Spain are low anyway, this is a problem. That’s why growth is put on hold right now.”

Is there still a future for Spanish PV though? “Absolutely,” concluded de Haan. “Right now our official forecast is for 2014 that they will reach 1.1 GW again, which is much higher than 2009.” He said that in comparison with 2008 however, where the region installed 2.4 GW, the market has to “to start again, from virtually zero”.

Read more about Spain’s PV market in the September edition of pv magazine.