Spanish Solar Sector: raging bull or stunned cow?


New photovoltaic projects have grown at a phenomenal rate in Spain in the last several years, reaching around 1500MW of new installations in the last 12 months (from 250MW built over the past 5 years) and accounting for an enormous amount of global PV panel demand.  However, the land of eternal sunshine seems to have gone dark these last few months with almost no publicity on new project development. 

A quick scan of Greentech media and still shows a substantial number of new projects in the California area while Spain-based is showing almost no dealflow for new installations.  What gives?

Well, it´s pretty simple; after several years of unchecked, enormous growth the solar regulating entity (CNE) has placed a performance bond requirement of €500/kW on new installations.  In and of itself a bond requirement is not bad: it discourages speculation, provides a bulwark on which the central administration can rely, and limits the number of haphazard permit requests that have plagued municipalities and utilities alike.  Unfortunately, the process itself provides little visibility on how to qualify an installation with the basic feed-in tariff.

For example, a 2MW project  requires a bond of €1MM which secures the sponsors´ place in a waiting list called the “pre-asignación”.  There are only 133MW of available capacity within each feed-in tariff level and the tariff is reviewed and/or revised on a quarterly basis based on how much of the cap has been reached.  Currently this tariff is €0,32/kWh but once the envelope has been reached, the tariff is revised downward for the following quarter.  For those who have secured their place in line and have qualified for the €0,32 tariff, they have 12 months to complete and connect the project.  Failing to do so (whether for financial reasons or permitting problems) means losing the bond.  For those who have not secured their place, there is a revision downwards of the feed-in tariff for which they can either a) maintain their bond and their position in line until they have qualified and accepted the next feed-in tariff or b) they can retract their bond and go home.

While this bond method seems to be clear in methodology, in practice there are very few companies in the current financial climate capable or simply willing of putting up credit on a 6-12 month basis with no guarantee on how it´s  put to work. 

As time goes one, the legislation will continue to be fine-tuned, however the confluence of tightened liquidity, a crashing economy, and a confused permitting process has changed the Spanish PV market from a raging bull to a stunned cow. Stay tuned as the story unfolds for next quarter.

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  1. It may also have a lot to do with the fact that the Spanish government has just introduced taxation (from Jan 09) on solar installations having had a zero position in the past (hence the previous massive growth). As there is currently little in the way of inducement to using green power in Spain it would have to compete with other players like ENDESA for supply – on thier terms. Add to this, that the Spanish economy is in its 3rd qtr of recession (it just posted a 0.2% minus growth position) i am not surprised that the deal flow has ground to a juddering halt. My view is that Solar Spain will be in this state of doldrum for at least the next 24 months and green energy will look to bio-mass and waste to energy for its leadership.