Fri Apr 30th, 2010 at 01:49:08 PM EST
Last week, news came out at the Spanish government was considering cuts in feed in tariffs (FITs) for renewable electricity. As I speculated then, it looks like solar is the problem. However it's not new solar thermal plants coming on line that look to be the problem. It's the myriad, tiny solar photovoltaic (PV) facilities across the country. The situation is to say the least a mess.
Yesterday, the minister for Industry, Miguel Sebastian, came out blaming FITs for increases in electric rates. The mess of it is that there's probably some truth to this because of the outsized portion of subsidies going to tiny PV facilities, however, as Jerome has reminded us, we know that FITs done right for commercial scale wind tend to lower rates.
The question is whether the solar bubble is going to kill FITs for new wind facilities, but there is hope.
Sebastian has targeted solar out for blame, while giving some praise to wind.
The document nails home other data inviting the imposition of order in the renewables sector "before the 1 of July," and that stir thoughts that the PV sector is going to be one of the biggest targets. "While the wind industry had net exports of 1.3 billion (euro)in 2008, PV is responsible for improts of 5.128 billion (euro).
There exist an enormous variety of installations of tiny facilities that make the management of the network difficult," he added. And, specified: of the 53,000-54,000 installations he calculates that more than 50,000 are PV. "We've been pioneers in renewable energy, said Industry, but this has provoked a bubble in PV and thermal solar."
He continues, in wind installations, "our tariffs are in line with Europe, however, in PV rates have been the most elevated." Of the 6,215 million (euros) in subsidies last year, 2,688 million were solar, as compared to 1,608 million for wind.
Please excuse the poor translation. It's mine, and I'm having difficulty conveying the point in English, even though I get the Spanish.
The paper links to a government document that explains quite a bit.
The cost problem has less to do with residential rates, where Spain is only 4.7% above the EU-27 average, falling beneath the UK and Germany, than for industry, where Spanish rates are 16.7% higher than the EU-27 average.
The immediate cause of the increase is the rising portion of FITs going to solar. (In the figure below the green is wind, the yellow solar.)
The graph below (same color scheme) explains even more clearly. On the left is the proportion of renewable electricity coming from each source. On the
leftright [ed afew], is the proportion of FIT funds going to each source. In 2009, solar generated only 11% of renewable electric, but took in 53% of FIT funds. Wind, on the other hand, generated 64% of renewable electric, and only took in 31% of FIT funds.
The problem is that a solar bubble is being blown by excessively high rates paid to the sector. The solution to which is simply to lower the FIT going to them. The danger is that pro-fossil fuel interest groups are going to use this opening to argue that the merit order effect is a myth, and attack the idea of FITs.
If Spain can pull off a FIT reduction for solar, they will be able to head off the further inflation of a solar bubble, while keeping the support for wind alive.
Industry has ambitious goals. 20% of Spanish final energy, and 40% of electricity, from renewables by 2020. With 25%+ of Spanish electricity now coming from nukes and conventional hydro, that's approach 2/3rds of power from non-fossil fuel sources. Which, given the role of combined cycle natural gas in electric production, should help close up Spanish foreign account deficits.
I hope that they can pull this off, this is a good model for other countries.
Update 5/1 16:33 GMT
Dodo has asked some good questions below. I'm going to try to give a little bit more info to clarify things. The Spanish FIT has two regulated rates. One is for a build in period (15-25 years, depending on tech.) The second applies after that. I've mocked up charts of the FIT during the first period below. Rates for PV were changed in 2008. First, the pre-2008 regime.
Second, the regime after that year. Only the PV rates changed, but the shrink in the scale of of installations anticipated by the FIT says a lot.