Here Comes the Sun? Solar Bubbles and Sustainable FITs in Spain

by ManfromMiddletown 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 ~~left~~right [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.

Here Comes the Sun? Solar Bubbles and Sustainable FITs in Spain | 23 comments (23 topical, 0 editorial, 0 hidden)

Re: Here Comes the Su (none / 1)

I have to run now (Korean test), but I will be back in about an hour and a half.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Fri Apr 30th, 2010 at 01:56:40 PM EST

Re: Here Comes the Su (none / 0)

Made a small edit.

by afew (afew(a in a circle)eurotrib_dot_com) on Sat May 1st, 2010 at 02:25:39 AM EST
[ Parent ]

Re: Here Comes the Su (none / 0)

Thanks!

The dangers of trying to study up and write at the same time.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Sat May 1st, 2010 at 10:51:32 AM EST
[ Parent ]

Re: Here Comes the Sun? Solar Bubbles... (4.00 / 3)

I'm rather uncomfortable with this account.

The first question to ask is, is the minister of industry an impartial observer?
In particular, why are a 'myriad tiny facilities' a problem, and how do they make the management of the network difficult? This is not substantiated, and it seems the minister is channelling the growls of energy majors.
The Spanish solar bubble of too generous rates has been punctured already, with the rate cut for 2009. If you look closely at the bar graph, you see that solar's big income jump is from 2008 to 2009, which reflects the even bigger jump in new installations in 2008. Thus, solar's current share of the Spanish FIT payout totals is a legacy issue, not an on-going bubble.
There's more to the legacy issue point. In Spain's FIT system, a rate reduction would not affect new installations only, but existing ones too. So, while you think this is about stopping a bubble, the main direct effect would be that existing installations are made unprofitable. And the main indirect effect would be that investors into other FIT-supported generation modes could turn insecure, too.
It's nice to put share of electricity produced and share of FIT support side-by-side, but does it make any sense? Given that there are higher FIT rates for technologies that are currently (and in the recent past) more expensive, it stands to reason that they would get more in total if FIT-supported sub-markets are to grow to the same scale...
In an as yet more limited extent, but with a much better regularity (daily cycles), Jérôme's point about the merit order effect of wind power on electricity prices works for solar, too.
In closing, I note I remember the time when, in Germany, wind, too, was attacked for (a) taking too much FIT money relative to other generating modes, (b) having too generous rates (with focus on small-scale inland projects), (c) making grid operation difficult, (d) making electricity expensive. (This was about five years ago, and the effect was rule changes halving the wind market and boosting the PV, solar-thermal and biofuels sectors.)

_{*Lunatic*, n.

One whose delusions are out of fashion.}

by DoDo on Sat May 1st, 2010 at 03:51:01 AM EST

Re: Here Comes the Sun? Solar Bubbles... (none / 0)

I don't know enough about the guy to give an honest answer to that. He was trained as an economist at the University of Minnesota. No obvious bias at first glance.

I don't buy the grid argument, but I do think that there's a very simple recognition here that PV is the problem. It's never going to develop into commercial level installations, and that's the point of these FITs. The Spanish government recognizes that done right FITs can be used to help develop local industries. There is already a wind energy cluster in Spain. There's a developing thermo-solar cluster, and and even newer one for wave energy. These all tie into established manufacturing bases in the north of Spain.

Wind drew upon the massive machine tool industry in the Basque Country. Thermo-solar connects into companies making mirrors for autos. And wave energy will employ the shipbuilding capacity in the region. This is as much about building Spanish industry as it is about an energy policy.

That said, the current FIT in Spain come from 2 sources. Royal Decree 1578/2008 specifies rates for the PV sector, and Royal Decree 661/2007 covers rates for the rest of the renewables sector. I'll post a copy of these rates later.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Sat May 1st, 2010 at 11:21:26 AM EST
[ Parent ]

Re: Here Comes the Sun? Solar Bubbles... (none / 0)

It's never going to develop into commercial level installations

Why not?

The Spanish government recognizes that done right FITs can be used to help develop local industries.

That's true for solar, too. The German PV industry did not grow overnight.

_{*Lunatic*, n.

One whose delusions are out of fashion.}

by DoDo on Sat May 1st, 2010 at 02:41:28 PM EST
[ Parent ]

Re: Here Comes the Sun? Solar Bubbles... (none / 1)

I've updated with the FIT rates, and the change in 2008.

Notice that the anticipated scale of PV installations shrinks enormously in 2008.

The problem with very small PV installations is that they are primarily rooftop affairs. They aren't going to fuel the creation of commercial scale energy, instead they're a subsidy to the construction industry.

The worst case scenario from the capacity factors given in the original legislation was 15.67% capacity factor.

So that's 1372.5 KwH for every KW of installed capacity.

At a guaranteed rate of 0.32 €/KwH, that's a €439.20 subsidy for every KW installed a year, €439,200 per MW. At that rate, you're looking at total payback in a matter of a very few years.

The rate's too high.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Sat May 1st, 2010 at 01:04:35 PM EST
[ Parent ]

Re: Here Comes the Sun? Solar Bubbles... (4.00 / 2)

I've updated with the FIT rates, and the change in 2008.

I realise my wording wasn't clear on this, but by the bubble bursting, I meant that the Spanish PV market collapsed already last year, after a leaping record (based on EPIA numbers:

2007: 560 MW new, ~700 MW total
2008: 2700 MW new, 3400 MW total
2009: 69 MW new (no typo!)

That's a burst bubble for you if there is one.

So, again: this new talk of a strong rate cut you highlight in the diary will affect almost only solar cells installed years ago, not ones newly installed en masse now.

The problem with very small PV installations is that they are primarily rooftop affairs.

Why do you see that as a problem?

They aren't going to fuel the creation of commercial scale energy

Again, why not?

The worst case scenario from the capacity factors given in the original legislation was 15.67% capacity factor.

Could you cite the source? (It could be something worth to bookmark.)

At that rate, you're looking at total payback in a matter of a very few years.

That's tricky. Spain re-sets the rate every year, and apply for all units, whether installed years ago for €6000/kW or installed in the near future for €2500/kW. That is the (not known in advance) degression of the rate affects the payback time. So (if Spanish prices are similar to those in Germany) a kW plant installed in Q1 2009 for €3922 would be paid back in around 9 years if the rate stayed constant, but in 20 years if there is an annual 10% reduction.

Put it another way: if you are in Spain and consider installing a PV solar cell, when you calculate whether the FIT rate will make your investment pay for itself, you have to anticipate future rate cuts by the government. Hence, even though 0.32 €/Kwh seems generous, if people suspect that there could be more sudden 25% rate cuts on the horizon, it's no wonder only 69 MW has been installed last year.

_{*Lunatic*, n.

One whose delusions are out of fashion.}

by DoDo on Sat May 1st, 2010 at 03:38:11 PM EST
[ Parent ]

Re: Here Comes the Sun? Solar Bubbles... (none / 0)

So, again: this new talk of a strong rate cut you highlight in the diary will affect almost only solar cells installed years ago

...will affect almost only and is aimed at...

_{*Lunatic*, n.

One whose delusions are out of fashion.}

by DoDo on Sat May 1st, 2010 at 04:05:33 PM EST
[ Parent ]

the fundamental problem (4.00 / 2)

is that solar is already GW-sized and still 4-5 times (at least) more expensive than traditional power sources. The FIT is necessary to get the technology to improve and become cheaper, but the cost in the meantime is becoming significant. The only solution is to persist, but it gives opponents of renewables some easy sticks with which to beat supporters in our age of soundbites and simplistic arguments.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Sat May 1st, 2010 at 01:03:06 PM EST

Re: the fundamental problem (none / 1)

But.....

Is commercial scale solar going to be PV or thermo-solar?

PV is dominated by residential size units.

Thermo-solar is dominated by very large plants on the order of a decent sized windfarm.

It's the domestic versus commercial wind debate in a different context.

I think that there's a great argument for keeping the FIT put €0.2694/Kwh for thermosolar, but I just don't see the argument for encouraging rooftop installations. PV is great for specific uses (like when used with LEDs for streetlights) but it seems that money is better directed into thermo-solar.

Plus, I think that the merit order effect probably has a cost benefit factor, which means that at some point the money paid in by consumers in FIT isn't recovered in lower electricity prices. I have no idea where that is, but I do think that it needs to be taken into account.

FITs are investments, and I'm not convinced that the current Spanish rate for PVs is a good investment. It's so high that it will suck money out of investments in thermo-solar in wind, and encourage every building board to put some PV arrays on the roof to cash in. The problem is that the capacity added is going to be minscule.

Thermo-solar yes. Wind yes. PVs no.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Sat May 1st, 2010 at 01:17:08 PM EST
[ Parent ]

Re: the fundamental problem (4.00 / 2)

It's the domestic versus commercial wind debate in a different context.

Huh, no. Unlike small and big wind, (1) they are different technologies, and (2) you can't apply the same scale factors for every generating mode.

Ad 1, while the difference between domestic and MW-scale wind is largely in the capacity factor (wind is much worse near the surface than a few dozen metres high, while turbines are the same basic technology with production+installation costs per kW not being strongly non-proportional), electricity generating solarthermal is not scaled-up PV, and even their geographic viability differs.

Ad 2, for wind already, the ideal plant size is much smaller than for coal or gas or nuclear (and got the same insane attacks comparing 1MW turbines to 1GW nuclear reactors). PV, concentrated solar and electricity generating solarthermal are different technologies, so the ideal plant size is different.

It's so high that it will suck money out of investments in thermo-solar in wind

Sorry but this is complete bullshit. The FIT is not a subsidy paid from a limited budget by the state, but a fixed price paid by distributors and thus redistributed among consumers.

_{*Lunatic*, n.

One whose delusions are out of fashion.}

by DoDo on Sat May 1st, 2010 at 04:01:32 PM EST
[ Parent ]

Re: the fundamental problem (none / 1)

I thought to go into some details on Ad 1.

First, on the geographic aspects.

Rooftop solar and both domestic and MW-scale wind share a benefit compared to greenfield solar farms of either type (large-scale PV, concentrated PV [CSP] and solarthermal): they take away little or no real estate. Thus, greenfield solar can have a significant contribution only in places with lots of cheap desert-like area available.
Unlike Germany, Spain is such an area. Thus, contrary to what you write in the diary, the 2008 Spanish PV boom (see stats upthread) was overwhelmingly in large greenfield farms (and large industrial rooftops), not on private home rooftops. While I don't have actual stats for it, one can add up the 2008 Spanish plants in the World's largest photovoltaic power plants ranking: just the farms 2MW or above add up to 2096 MW, out of the 2700MW total. (Out of the 3400MW added in Germany this year, the same number is just 517 MW.)
It also helps that apparently, Spain has no separate FIT rates for greenfield and rooftop (in Germany the first is lower).

Second, all renewable technologies can be considered evolving technologies, for which the price per kWh as a mature technology can only be projected. These projections come with differing certainty, however, given the different stages of evolution these technologies are in. And this is where the relationship of domestic wind and large wind, and that of PV and CSP or solarthermal is inverted: in the eighties already, large wind was an industry producing in large series, while small wind still remained at backyard shop level to this day; while in solar, PV is the well established industry with factory-size series production, and CSP and solarthermal are still in the pioneering phase.

That is, one can infer with some certainty that PV and MW-scale wind will be able to cut prices further according to projections, while CSP, solarthermal and domestic wind have yet to prove their claims. (What could be the risks for CSP or solarthermal? Maintenance/leaks, for example.)

Finally, there is also the issue of the rate of production. It remains to be seen whether CSP or solarthermal plants can be projected, approved, manufactured and installed at an annual rate in the Gigawatts, like large wind and PV showed that they can.

_{*Lunatic*, n.

One whose delusions are out of fashion.}

by DoDo on Sun May 2nd, 2010 at 07:35:00 AM EST
[ Parent ]

Re: the fundamental problem (none / 1)

I don't really understand the difference made here between commercial solar tech and individual solar tech?

Thermic solar exists in different technology, all of them of some use, the simplest being a black-painted water barrel on top of one's house. They are hardly the most expensive.

Solar PV is still economically unsafe at the moment, but the tech is the same for commercial or individual installation, the pannels being standard-sized. The tech difference here is between low yield silicium pannels and high yield GaAs ones. None of these are economically sustainable at the moment, but the research is very active here.

It's the individual/commercial PV that is badly in need of tariff feed-in, because individual thermic solar is used for hot water generation, not electricity. I don't know the economics of industrial thermal (hot water+turbine+generator) but I think it should be similar to gaz turbine generation regarding the capital investment.

Should your diary be understood as a critic of solar PV, both commercial or individual? If so, the question is more on this particular technology than on solar in general.

by Xavier in Paris on Mon May 3rd, 2010 at 08:09:38 AM EST
[ Parent ]

Re: the fundamental problem (none / 1)

Thermic solar exists in different technology

Indeed, but electricity generating solarthermal, where some fluid medium is heated by mirrors and drives a turbine, is a bit more complex, with a few more cost and maintenance risk factors, and very much at its infacy... Pilot plants of this type exist and operate since the nineties, but claims that the price could soon be reduced to market levels also exist since the nineties, yet nothing has been built for 15 years. Presently, some new plants are built in Spain and the USA, so we'll see whether those ambitions in economics can be realised. Until then, it needs feed-in tariffs, too.

Should your diarybe understood as a critic of solar PV

MfM quite clearly states that he thinks solarthemal is the way to go in the exploitation of solar energy, and criticises PV. (And I challenge those criticisms as unfounded and based on mistaken assumptions.)

_{*Lunatic*, n.

One whose delusions are out of fashion.}

by DoDo on Mon May 3rd, 2010 at 12:37:38 PM EST
[ Parent ]

Re: the fundamental problem (none / 0)

But would a solarthermal plant as you describe it be really different from, say, a natural gaz turbine plant?

In terms of physics and engineering, I don't see where the difference would lay.

(Obviously in the heating system, but that doesn't have any need for mechanical parts, so low maintenance, and probably simpler than combustion chamber anyway)

by Xavier in Paris on Tue May 4th, 2010 at 12:21:37 PM EST
[ Parent ]

Re: the fundamental problem (none / 0)

It's not running on steam, which could mean a myriad little technical differences. I'd say lots of extended piping (if the system is such) subject to daily heat expansion could potentially be high maintenance, as can be motors adjusting movable mirrors (if the system is such).

_{*Lunatic*, n.

One whose delusions are out of fashion.}

by DoDo on Tue May 4th, 2010 at 05:42:37 PM EST
[ Parent ]

Re: the fundamental problem (none / 0)

It's not running on steam, which could mean a myriad little technical differences.

In many, if not most, cases, solar thermal plants do run on steam, the mineral oil or molten salt medium is solely for heat transfer. Which is why one of the advantages of solar thermal over PV is that it can share a turbine with a natural gas fired plant. Where there is sufficient insolation and empty space near natural gas fired plants, that should be a boon as natural gas prices rise and solar thermal equipment costs drop.

I'd say lots of extended piping (if the system is such) subject to daily heat expansion could potentially be high maintenance, as can be motors adjusting movable mirrors (if the system is such).

There are actually multiple configurations. Solar troughs are highly expensive, but also highly efficient.

Solarmundo fresnel collectors drive down the equipment cost by using flat plate glass collectors that are rotated on an axis. There's a system of 6 of these that are concentrated on a single pipe. This is inefficient, but much less expensive, because you don't have to produce curved glass panels.

Finally, the solar power tower concept uses a field of flat plates rotated to concentrate heat on a single focal point. That means no piping, and superheating at the focal point.

My money is on the solarmundo fresnel collectors, because capital cost matters much more than efficiency when the fuel is free.

What I see is that solar thermal is a natural complement to natural gas fired plants where the insolation exists. They can share a turbine, and that drive down the initial construction cost, plus the ability to switch over to natural gas in order to heat steam provides a natural backup. In that case, the point is that the solar thermal installation allows for the conservation of natural gas, not replacing it.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Tue May 4th, 2010 at 07:24:40 PM EST
[ Parent ]

Re: the fundamental problem (none / 1)

Don't forget the need for cooling. Arizona effectively ships, in the form of electricity, a chunk of its valuable water resources to California by using it for evaporative cooling on thermal solar plants.

http://ag.arizona.edu/azwater/awr/septoct08/d3aa3f8e-7f00-0101-0097-9f6724822dfe.html

by asdf on Tue May 4th, 2010 at 09:50:30 PM EST
[ Parent ]

Re: the fundamental problem (none / 0)

I wonder if there's a way to do steam recapture, forcing the emissions into bedrock, and using the earth itself as a type of heat sink.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Tue May 4th, 2010 at 10:05:33 PM EST
[ Parent ]

Re: the fundamental problem (none / 0)

Maybe, but you don't have to go down very far before it gets pretty hot. Plus, rock and earth are good insulators, so you would need huge amounts of area...

by asdf on Tue May 4th, 2010 at 10:45:26 PM EST
[ Parent ]

Re: the fundamental problem (none / 0)

industrial thermal (hot water+turbine+generator)

Not hot water: oil or molten salt.

_{*Lunatic*, n.

One whose delusions are out of fashion.}

by DoDo on Mon May 3rd, 2010 at 12:39:47 PM EST
[ Parent ]

Another View (4.00 / 2)

Spanish PV After The Crash

From roaring boom to crippling bust, the story of Spain's solar industry has entered into the mythology of the renewable energy business. For free market economists it is a fireside tale of the dangers of government interference, while for the opponents of renewable energy it is exhibit 'A' in the case against solar. But as the dust settles, we can now analyze what really happened, and answer the question: Is the Spanish solar industry terminally ill?
....
"Spanish PV companies have shown a great resistance and great capacity to adapt to really bad times. We are growing now and continue growing more in the medium and long term," said Diaz.
There is also more emphasis on household systems. Prior to the crash, vast and somewhat controversial ground-mounted arrays made up the bulk of installations. These may now be a thing of the past.
"The current support scheme is better for rooftop and domestic systems than the former one. We are now trying to introduce net metering to the support scheme and the government likes the idea," wrote Diaz.

"Life shrinks or expands in proportion to one's courage." - Anaïs Nin

by Crazy Horse on Tue May 4th, 2010 at 05:08:08 AM EST

Here Comes the Sun? Solar Bubbles and Sustainable FITs in Spain | 23 comments (23 topical, 0 editorial, 0 hidden)

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