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SOLAR ENERGY: Take care when Interpreting IPCC reports on SOLAR PV deployment.

Recent Spanish Photo Voltaic (Solar PV) history (from the IPCC). Read such reports with a critical eye and you may notice some facts are missing..

This year the IPCC clearly reported that to provide a predictable and transparent framework to attract private investments, the Spanish government enacted a huge program, going back to it’s first Feed-In Tariff (FIT) in the nineties. They also published indicative targets for installed capacity in a decade long development schedule. Due to the immaturity of the market, initially the feed-in tarif was not enough to develop the PV sector, despite Spain’s significant solar resource, so  a combination of investment subsidies and low-interest loans was established. Subsidies remained in place until 2005, and total direct subsidies to PVs during the period amounted to around USD 65 million by the end of that year.

In addition to raising the tariff for PV, new acts increased the maximum capacity of projects that could receive the high tariff from a maximum of 100 kW to 10 MW, and made projects of up to 50 MW eligible to receive 25-year fixed price contracts. Cost benefits associated with the economies of scale of larger projects naturally combined with the policy changes to encourage development of several new ground-mounted projects of 10 MW.

Newly installed capacity increased from 21 MW in 2005 to 107 MW in 2006 and 555 MW in 2007. In September 2007, 85% of Spain’s RE target had been achieved, setting off a one-year deadline for the government to publish new targets and tariffs, and for developers to complete projects under the existing scheme. This period was fine for most RE projects already under development, with relatively long lead times; but PV projects can be developed quite quickly. The one-year notice set off a mad rush to install PV systems before the existing system expired. As a result, 2,575 MW of PV were added in 2008, breaking all past records and making Spain the world leader for PV installations that year.

spv

Adjustment proposals to add capping because the country’s targets had been exceeded loomed; in late 2008 the government established a new economic regime for future installations. For the first time, a differentiated tariff was adopted for building-integrated PV (known as BIPV). In addition, annual caps were set for new capacity, with separate caps for ground-mounted (up to 10 MW) and rooftop (under 20 kW; and 20 kW to 2 MW) PV projects. The caps adjusting automatically depending on the previous year’s installations, while the tariff for ground-mounted projects continues to decrease over time.

The new scheme aimed to: provide long-term predictability; better control the cost of the FIT; guarantee profits more appropriate for a regulated market; encourage declining investment costs; increase competitiveness; and encourage distributed generation through BIPV. The policy change resulted in a significant increase in distributed rooftop projects. At the same time, uncertainty about the design of the new framework scheduled for adoption in late 2008, the reduction in market size due to the cap on ground-mounted systems, and lack of experience with the new administrative procedures led to a significant reduction in new capacity installations.

In their IPCC report they put to us that Spain’s story highlights the importance of learning from experience and of building forward-looking flexibility into policy to avoid the need for frequent regulatory changes. Overall, lessons from Spain’s experience include: a combination of support schemes can be important for advancing RE technologies, particularly when the market is immature; ambitious long-term targets are critical as are stable, predictable policies; and transitional incentives that decrease over time internalizing technology development and therefore keeping constant a reasonable internal rate of return for each new project, can foster technological innovation and control total costs.

But wait..we at Lessthunk were thinking that even though all this sounds entirely plausible, wasn’t it really a lot simpler, wasn’t it just a bad time for capital investment as the global recession started to take hold in Europe, especially in Spain ?

The IPCC seem to be so focussed on the “energy policy facts” that they missed the background economic reality, macro-economic uncertainty and a massive rise in unemployment. You decide ..

Here was the unemployment outlook during that key period..

Spain-Unemployment

Next time you get to reading an IPCC 1100 page report (even if its signed off by all the top names) keep asking yourself one simple question along the way “did they also consider reality ?”.

 


Categorised as: economy | energy

Posted by: Phaedrus



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