Summary
1) The reduction in the feed-in tariff still makes investing in PV solar in Spain a profitable business; the demand for new facilities is much higher than the new allowed quotas. 2) Previous growth in the Spanish PV industry was unsustainable. It's good news that the market is cooled down to a sustainable path. 3) The new regulation will foster cost-reducing R+D, and we’ll get faster to the point where government support is no longer needed.
Analysis
The new regulation of the PV industry in Spain (September 2008) has cut the feed-in tariff to 0.32 Euros/kWh for on-the-ground facilities, and has set the following quotas for new facilities in 2009:
1) 267 MW for type I facilities (on-the-roof or on-the-wall facilities).
2) 233 MW for type II facilities (on-the-ground facilities).
About how many MW were installed in 2008, there aren't final numbers because of the many claims of fraud in the rushing to get connected before the old feed-in tariff expired, but the final number is going to be over 2,000 MW. Obviously, this means that the new regulation creates a dramatic cut on the path of growth for the Spanish PV industry. Some analysts even predicted that the allowed quotas were not going to be filled with the new regulation. However, the provisional data on the first quarter applications show that just in one quarter there have been applications for more power than what is allowed for the whole year. Therefore, the first conclusion is that the reduction in the feed-in tariff still makes investing in PV solar in Spain a profitable business.
But why introducing quotas and not just reducing the feed-in tariffs? The reasons for the change are clear:
1) Previous growth was unsustainable. Do you really think that the people being fired now in the Spanish PV industry were well trained experts in the field? Of course not, a lot of people were hired for the rushing in demand, and it's good that the market is cooled down to a sustainable path.
2) Need to foster R+D: Only the most efficient should survive. The previous feed-in tariff was so generous that any facility, regardless of how inefficient, was very profitable.
3) Finally, the government was also concerned with reducing the tariff deficit (the difference between the regulated tariff that consumers pay and the cost of electricity in the Spanish wholesale market). The reluctance of the government to increase prices for consumers has led to a big tariff deficit. But notice that the government doesn't pay it! It's paid back by future consumers. Nevertheless, it’s an urgent matter to get rid of this deficit sooner rather than later, and the feed-in tariff that subsidizes renewable energies add up to this deficit, since it adds up to the consumers bill.
