Spain’s Solar Pullback Threatens Pocketbooks

BB.

From the New York Times:

Spain’s Solar Pullback Threatens Pocketbooks

ÁGUILAS, Spain — Six years ago, Justo Cruz Rodríguez, who runs a small business here designing signs, was looking for a way to generate a steady, if modest, pension for himself and his father.So when the government passed a law offering attractive rates for solar energy — and guaranteed them for the next 25 years — he mortgaged his house, his father’s house and even his workshop to install half a dozen rows of solar panels in his father’s garden, with the idea of selling his excess electricity.
“It seemed so safe,” he said recently. “It was a government guarantee.”
...

But experts say the government never expected so much investment and never came up with a way of paying for it. When the economic crisis hit, in 2008, and demand for energy went down, the deficit widened at an even faster rate.

Spanish officials say they have no choice now but to reduce the payments, which were once offered to spur investment in solar energy but are now considered overly generous, especially since the cost of solar panels has dropped precipitously in recent years.

The new government payment system has left thousands of investors, like Mr. Cruz, 51, in a state of shock.

“I am going to lose everything,” Mr. Cruz said, standing near the panels he thought would make his old age easier. “I will be homeless. At my age, homeless.”
...

Not just utilities are having cash flow problems with "distributed green generation".

-Bill

SolInvictus

Re: Spain’s Solar Pullback Threatens Pocketbooks

Spain’s Solar Pullback Threatens Pocketbooks wrote:

Under the new law, instead of the current per-kilowatt-hour fees, the government will offer a formula intended to produce a 7.5 percent return on investment. The problem, experts say, is that the basis for determining that investment is unclear, and the formula looks likely to penalize those who paid more for their equipment, took out big loans or are paying high interest rates. The Solar Power Union estimates a cut in income of 30 percent to 50 percent for producers.

Already, some investors are turning to the courts. Their lawyers say the original law specifically guaranteed a fee of 58 cents for each kilowatt-hour for the next 25 years and guaranteed 80 percent of that for the years thereafter. It also clearly stated that any future changes could affect only new installations.

Unfortunately the article does not mention the average price of electricity in Spain making it difficult to determine the extravagance of $.58 / kWh.

I have read elsewhere that the primary problem is Spain's refusal to increase the price of electricity as the cost of fossil fuels to make the electricity increased. The government has targeted the PV generators to pay for it all. The wonders of price controls.

This article, Wind power was Spain's top source of electricity in 2013 (The Guardian, Monday January 6, 2014), contains a link to The Spanish Electricity System, Preliminary Report 2013 (Red Eléctrica de España (REE), PDF file), which shows the installed Spanish capacity as at December 31, 2013, (102,281 MW) on page 11 as:

Combined cycle 24.8%
Coal 10.9%
Nuclear 7.7%
Hydro 19.4%
Solar thermoelectric 2.2%
Solar photovoltaic 4.3%
Wind 22.2%
Renewable thermal 1.0%
Cogeneration and the rest of the technologies 7.5%

and production (they call it "Annual balance of electrical energy" on page 7):

National total (GWh)
Hydro 34,205
Nuclear 56,378
Coal 42,384
Fuel/gas 6,981
Combined cycle 28,983
Gross production 168,932
Self-consumption -7,012
Hydro 7,098
Wind 54,301
Solar photovoltaic 8,397
Solar thermoelectric 4,554
Renewable thermal 5,020
Non-renewable thermal 32,309
Special regime 11,679
Net production 273,598
Pumped storage consumption -5,769
Peninsula-Balearics interc. 1,266
International exchanges -6,958
Demand (b.c.- at power station busbars) 260,870

So Spanish PV provided 8,397 GWh / 273,598 GWh = 3.1% of the electricity in 2013. Although presumably a fraction of this qualifies to be paid at the rate of $.58 / kWh, the maximum monetary amount is 8,397 GWh * $.58 / kWh = $4.9 billion in 2013. Now I need to know how much revenue was collected in Spain from selling electricity in 2013, but I doubt this small penetration of PV could be causing the budget crisis.

SolInvictus

Re: Spain’s Solar Pullback Threatens Pocketbooks

Timeline of Spanish Policy on Solar Systems

1994-12-09 Royal Decree RD 2366/1994 is a failed attempt to regulate the economic aspects of renewable energy (Spain: The Regulation of Renewables, IFLR, 2008-10).

1998 Spanish Renewable Energies Plan 1998-2010 (PER 1998-2010)

1998-12-23 Royal Decree RD 2818/1998 creates a single feed-in tariff for renewable electricity generation based on the final average electricity market price and a premium.

2000 "energy deficit" begins accruing, that is, electricity costs more to produce than ratepayers pay. The government pays the difference to the producers and refuses to increase the regulated price of electricity. Spanish feed-in tariffs – a wrapup Renewables International, 2013-07-22; The Spanish solar collapse, Grist, 2009-10-12

2004-03-24 Royal Decree RD 436/2004 modifies RD 2818/1998 to allows the renewable energy provider to choose between a feed-in tariff and a market price plus a premium plus an incentive in some cases.

2005 Spanish Renewable Energies Plan 2005-2010 (2005-2010) sets forth the goals (Spain: The Regulation of Renewables, IFLR, 2008-10):
1. a minimum of 12% of total energy consumption must be produced from renewable sources.
2. a minimum of 29.4% of the total generation of electricity must be produced from renewable sources.
The plan advises that the incentives for renewable energy systems should be increased to meet these objectives.

2007 Royal Decree RD 661/2007.
To discourage speculation an applicant for grid access for renewable energy is required to secure a bank guarantee of €20 / kW, with the exception of PV where the amount is €500 / kW (Spain: The Regulation of Renewables, IFLR, 2008-10).
Tariffs, premiums, complements, caps and floors shall be reviewed beginning in 2010 and every 4 years afterward. Any changes shall not apply until 2 years after the review is scheduled to begin.

2007 Shortly after RD 661/2007 was enacted, 85% of the objective (371 MW) for photovoltaic plants was reached (Spain: The Regulation of Renewables, IFLR, 2008-10).

2007-09 Due to the large number of applications, a law is enacted requiring all PV systems under development or construction to be finished and registered within 1 year to get the feed-in tariff (Spain: The Regulation of Renewables, IFLR, 2008-10).

2007 cap and floor introduced (Spain: The Regulation of Renewables, IFLR, 2008-10).

2007 solar market grows by ~100% (The Spanish solar collapse, Grist, 2009-10-12).

2008 Solar market grows by ~100% (The Spanish solar collapse, Grist, 2009-10-12)

2008-07 Oil price shock at ~$147 / barrel of crude oil and world financial crisis.

2009 "Energy deficit" increases to 14 billion euros (The Spanish solar collapse, Grist, 2009-10-12).

2010 "Energy deficit" forecast to reach 14.6 billion (US$20 billion) by the end of 2010 (Tariff Watch: Spain, PV Tech, 2010-06-30).

2010-12-23 Royal Decree RD-L 14/2010, limits the number of hours a PV system installed under RD 661/2007, since October 2007, may receive the rate specified by the feed-in tariff to 1,250 hours/year through 2013 (Spain reduces hours of subsidized sunlight, PV Magazine, 2010-12-28 ). Beginning in 2014, the maximum number of hours changes to a range between 1,230 and 1,750 per year depending on the location of the PV system.
It extends the number of years during which the photovoltaic feed-in tariff is paid from 25 to 28 years (Spain plans renewable energy cuts of up to €1 billion, PV Magazine, 2013-05-02).
The new rule is expected to reduce PV subsidies by 740 million euro per year from 2011 through 2013 (Spain reduces hours of subsidized sunlight, PV Magazine, 2010-12-28 ).
The law provokes harsh reactions:
APPA (Asociación de Productores de Energías Renovables): "The government provokes the ruin of thousands of private investors."
AEF (Asociación Empresarial Fotovoltaica) fears that the retroactive measures for operating plants will damage Spain’s position in the financial market to attract further investments (Spain reduces hours of subsidized sunlight, PV Magazine, 2010-12-28 ).

SolInvictus

Re: Spain’s Solar Pullback Threatens Pocketbooks

Continued Timeline of Spanish Policy on Solar Systems

2011-01-01 Royal Decree RD-L 14/2010 takes effect.

2011 The government is legally obliged to eliminate the "tariff deficit" by 2013 (Tariff Watch: Spain, PV Tech, 2010-06-30).

2011 Previous feed-in tariff rates for PV were between US$0.434 / kWh and US$0.4611 / kWh (Tariff Watch: Spain, PV Tech, 2010-06-30).
2011 Feed-in tariff for new large, ground-based PV plants reduced by 45% to US$0.1029 / kWh.
2011 Feed-in tariff for new large roof installations reduced by 25%.
2011 Feed-in tariff for new smaller roof installations reduced by 5%.

2011-01 ASIF's 500 members endorse filing a lawsuit in the Spanish high court and the European Commission alleging royal decrees RD 156/2010 and RD-L 14/2010 are inconsistent with Spanish and European law (Spain's Solar Sector Sues Government Over Retroactive Tariff Cuts, Renewable Energy World, 2011-01-24).

2012-02 The Spanish Parliament approves Royal Decree Law 1/2012 which immediately suspends the pre-allocation process and incentives for new renewable energy projects (Spain approves suspension of renewable energy subsidies, PV Tech, 2012-02-10).

2012-04-22 On Earth Day Spaniards march from Santo Domingo Opera Dos de Mayo protesting the suspension of the feed-in tariff for renewable energy, and the government ignores them (Spanish to march against solar incentive moratorium, PV Tech, 2012-04-20; and Spanish government “discriminates” against renewables, PV Tech, 2012-07-12).

2012-07 Spain has almost 4,300MW of PV capacity (Spanish government “discriminates” against renewables, PV Tech, 2012-07-12).

2012-07 Prime Minister Mariano Rajoy Brey pledges to Parliament to tax utilities in an attempt to raise sorely needed cash from renewable energy to curb €25 billion of debt (Spanish government “discriminates” against renewables, PV Tech, 2012-07-12).

2012-07 Concerns are raised by Exane BNP Paribas analysts, in a research note in June that the government could increase the current €0.50 /MWh tax on traditional generators to €5 /MWh and expand it to include renewable energy (Spanish government “discriminates” against renewables, PV Tech, 2012-07-12).

2012-07 "There are claims that the tariff deficit has been growing by about €3 billion each year which is being accredited to €7 billion paid in clean-energy subsidies" (Spanish government “discriminates” against renewables, PV Tech, 2012-07-12).

2012-07 A 19% tax on renewables receiving a feed-in tariff is announced (Spain proposes 6% umbrella tax on all power generation methods, PV Tech, 2012-09-17).

2012-09 The Spanish cabinet proposes an umbrella tax of 6% payable by all energy suppliers, irrespective of power generation (Spain proposes 6% umbrella tax on all power generation methods, PV Tech, 2012-09-17).

2013-01 Spanish PV company Siliken announces it has started insolvency proceedings (Spain to cut FiTs, PV Tech, 2013-02-05).

2013-02 Spain announces a reduction of 0.028% to its solar PV feed-in tariff due to modifications of the consumer price index (CPI) (Spain to cut FiTs, PV Tech, 2013-02-05).

2013-02 The Spanish government publishes changes in feed-in tariffs that are retroactive to January 1, 2013, for projects installed between 2009 and 2011 (Spain announces retroactive FiT cuts, PV Tech, 2013-02-19).
Integrated PV systems up to 20 kW installed in Q1 of 2009 get €0.3566 / kWh (US$0.4763).
All non-integrated systems installed in the 4th quarter of 2009 get €0.3356 / kWh.
Integrated PV systems up to 20 kW installed in Q1 of 2010 get €0.3493 / kWh.
All non-integrated systems installed in the 4th quarter of 2010 get €0.2656 / kWh.
Integrated PV systems up to 20 kW installed in Q1 of 2011 get €0.3135 / kWh.
All non-integrated systems installed in the 4th quarter of 2011 get €0.1249 / kWh.

2013 "Energy deficit" increases to 26 billion euros (Spanish feed-in tariffs – a wrapup Renewables International, 2013-07-22).

2013-04-18 "Tariff deficit" (same as "energy deficit?") increased to €35.6 billion (increased by €5.6 billion in 2012) according to the National Energy Commission (CNE) in its annual report. The increase was not caused by the PV sector (Spain: PV sector did not increase 2012 tariff deficit, PV Magazine, 2013-04-26). For 2012 (I think commas should be decimal point in English):


Technologycapacity (MW)Energy production (GWh)Total premium (€ millions)Total premium (€ millions)Total cost (€ millions)Deviation from 2011
Cogeneration6,44025,4484,831,2321,86551%
Solar PV4,2966,70338,942,6102,611.03%
Solar thermal1,5512,32623,7655392768%
Wind22,66447,1604,111,9372,0375%
Others4,12421,638-89125729%
Total39,12699,1917,287,2218,58619%


2013-07-13 More cuts to the PV feed-in tariff. The new payment system provides a return on renewable energy assets of 7.5% per year. The government expects payments to decrease by 2.7 billion euro (USD 3.5 billion) annually (Spain retroactively cuts feed-in tariffs, yet again, Solar Server, 2013-07-15).

2013-07 The government plans to increase retail rates for electricity by 3.2% (Spanish feed-in tariffs – a wrapup, Renewables International, 2013-07-22).

SolInvictus

Re: Spain’s Solar Pullback Threatens Pocketbooks

In 2008 Spanish unemployment began increasing as the global economy fell apart decreasing the demand for electricity and thus the revenue collected.

Attachment not found.

Source: Spain's Unemployment Rate

stephendv

Re: Spain’s Solar Pullback Threatens Pocketbooks

That's a great summary SolInvictus!

Bear in mind that you shouldn't treat the Spanish energy sector as if it was a mature and free market. It's rife with corruption and anti-competitive practices that would be considered illegal in other countries. Spain has fined the big 5 energy companies numerous times for this, e.g.: 61 million euros in 2011 for anti-competitive behaviour: (in Spanish) http://www.levante-emv.com/economia/2011/05/14/competencia-multa-61-millones-electricas-pactar-precios/806802.html

and more recently the government intervened in the "free" daily auction which sets the price of electricity for the next 4 months, and where on that particular day the price magically rose 13% over the previous day: (Spanish) http://www.rtve.es/noticias/20131228/boe-publica-incremento-del-23-recibo-luz/834762.shtml

The other thing that stands out is that they big bogey man of the "energy deficit" which the electrical companies shout about every time the topic of renewable energy comes up, is largely a fiction.
The deficit is the different between the true cost of energy generation, vs. what consumers pay. The government has effectively been subsidizing the cost of electricity to keep it "low" (one of the highest in europe in fact).

So a rational person might ask how we determine the cost of generation?
Simples. You just ask the electrical companies what their cost of generation is, and they'll give you an honest answer. No really.
How about an independent enquiry into the cost of generation? says the rational person.
Good idea, and it has been proposed, but the electrical companies have simply refused. So we're stuck with an "energy deficit" which is gathering interest and is mostly just made up.


They've recently installed a power line that crosses our property and we've been offered the option of grid connection. The above are just some of the reasons why I'd much prefer to be off-grid and outside the "casa de putas" that is the energy sector.

niel

Re: Spain’s Solar Pullback Threatens Pocketbooks

hope they aren't intending to shade your pvs to force you to go gt.

BB.

Re: Spain’s Solar Pullback Threatens Pocketbooks

stephendv wrote: »

and more recently the government intervened in the "free" daily auction which sets the price of electricity for the next 4 months, and where on that particular day the price magically rose 13% over the previous day: (Spanish) http://www.rtve.es/noticias/20131228/boe-publica-incremento-del-23-recibo-luz/834762.shtml

The daily auction was done in California for "deregulation" (power utilities were forced to sell of generation plants) and utilities could only buy power 24 hours in advance (long term contracts were prohibited by state law).

Well--you can guess what happened. For a few years, power was actually quite cheap. And there were no new power plants built (who would finance/build a power plant if you had no multi-year contracts for customers to buy your power at negotiated/stable prices). After a few years, usage went up and plants closed down/got long term contracts for out of California utilities (as well as plants shutting down randomly for "maintenance"). Utilities had to buy power--There was no option. Spot power prices soared to some ridiculously high price (maximum limit set by law). And utilities could not charge market price for power to their customers (state law only set prices once or twice per year).

Price for power (especially in summer) skyrocketed, a few rolling blackouts with promises of many more to come, utilities just about bankrupted, and generation companies raking in cash (Enron, and even "public power" utilities with generation like Los Angeles' government entity rolling in cash too) based on a system that was easy to game.

Amazed (but not surprised) to see another government try almost exactly the same thing (spot price market for power). Like the summer of 2000 all over again.

-Bill