Spain's Ministry of Industry, Tourism and Transport announced this
spring that it would hold an auction for the installation of 500 MW and
200 MW of new wind and biomass power capacities, respectively. The date
for the auction was not announced but it is expected that the call for
submissions will be published in the State Official Bulletin in the near
future. Bids for solar power capacity need not apply.
Sun Edison project in Caravaca de la Cruz (near Murcia), Spain. Credit: UNEF.
The Spanish Photovoltaic Union (UNEF) was upset by the news and is
currently working to have solar PV technology, which it called "the most
competitive in the world," included in the auction. "The attempted
eradication of the photovoltaic industry from the government does not
have any explanation," said Jorge Barredo, President of UNEF, adding
that solar is highly competitive "not only between renewable energies,
but also compared with traditional fossil fuels."
The exclusion of solar PV from the recent auction announcement was
not the only blow against the solar PV sector. Pedro Palencia, energy
policy director at UNEF explained that earlier this year Spain's
government announced an auction for new power capacity for the Canary
Islands that only sought wind. The Canary Islands complex is located in
the North West Africa and has the highest solar irradiation in Spain.
Self-Consumption "Sun Tax" In The Making
There are other concerns regarding Spain's current policy framework
for the self-consumption of PV power and the lack of net-metering. The
current self-consumption policy framework is very general and applies to
both on- and off-grid systems. The government said it would publish the
detailed regulations soon, adding that it is considering imposing a
tariff that UNEF calls a "sun tax." Effectively, this would mean that PV
system owners will be taxed for the power they produce even if it is
solely for their own use and not fed into the grid.
UNEF said that a "sun tax" like that would make solar uneconomical
even for self-consumption. Net-metering, a policy found in almost all
other Mediterranean countries, including Portugal, Italy, Greece and
Cyprus, is not available in Spain.
The Flawed Spanish Energy Market
The Spanish energy sector faces serious problems stemming from caps
on retail electricity prices, which have lead to market distortions.
According to David Robinson of the Oxford Institute for Energy Studies,
since 2001 the Spanish electricity system has accumulated a €30 billion
deficit resulting from inadequate tariffs that were not high enough to
cover electricity transmission and distribution costs, renewable and
conventional energy subsidies and other regulated costs. All Spanish
governments have been unwilling to pass the full costs on to customers,
and the current situation has worsened due to a decrease in energy
demand, the high costs of renewable subsidies and more specifically a
terribly wrong remuneration policy for solar PV systems in 2007 to 2012,
said Robinson.
Large solar installation in Spain. Credit: UNEF.
Solar on a residence in Spain. Credit: UNEF.
According to Robinson, the accumulated debt, "accounts for about 55
percent of a typical customer's electricity cost, with the remaining 45
percent associated with the wholesale price of energy."
UNEF's Palencia confirms this. "The actual costs covering the
electricity generation in Spain count for less than half of the
consumer's electricity bill and vary according to the power prices. The
biggest chunk of the electricity bill covers a huge list of other costs,
non-related to the fluctuating power prices of the wholesale market.
Such fixed costs are set by the government, which aims to increase them
further," Palencia said. "Under these circumstances, we [UNEF] don't see
how self-consumption can become competitive in Spain," Palencia
remarked.
Overcapacity and Depressed Demand
Last year's new RD413/2014 renewable energy law paved the way for
public procurement auctions for new power plants, which are expected to
take place in 2016 at the earliest. The recent announcement to auction
700 MW of new wind and biomass capacities took analysts by surprise.
Spain's major energy sector problem is "excess capacity together with
depressed demand," Aitor Ciarreta, professor of Economics at the
University of the Basque Country, Bilbao said.
UNEF's Palencia agrees. "Spain has installed almost double the power
capacity it currently needs and this problem tends to increase further
due to the weak state of the economy and the depressed demand," he
remarked.
A glimpse of hope shined in February when Spain and France opened a
new transmission line interconnecting the two countries and doubling the
electricity exchange among them. The new line, which has a power
capacity of 2 GW and is capable of reversing the direction of flow of
the energy exchanges between Spain and France in just 50 milliseconds,
is expected to boost Spanish electricity exports to France and alleviate
Spain's overloaded system. Spain is considered one of Europe's energy
islands being largely disconnected from the rest of Europe and the new
line, which is expected to go into commercial operation in June, can
provide a small, partial solution.
According to the latest statistics published today by Spain's
electricity grid operator Red Eléctrica de España (REE), the electricity
generation from January to April 2015 consisted of 22.9 percent wind
power, 23.1 percent nuclear, 15.4 percent coal, 14.3 percent hydro, 10
percent co-generation technologies, 8.4 percent combined cycle gas, 2.8
percent solar PV, 1.7 percent thermal renewable technologies and 1.4
percent solar thermal. In April alone, an impressive 63.9 percent of
electricity generation came from technologies producing zero carbon
dioxide emissions, including nuclear energy.
In terms of installed renewable power capacity, wind leads with more
than 23 GW, hydro has installed about 2.1 GW, solar PV 4.7 GW, solar
thermal 2.3 GW and other renewable thermal technologies around 1 GW.
Spain's total energy system has approximately 110 GW of installed power
capacity.
Policy Soup
Spain's latest renewable energy RD413/2014 law, passed last year
scrapped feed-in tariffs (FITs) altogether. Instead, each project
receives an income calculated separately per project and based on a
series of parameters that take into account a plant's “efficient
operation.”
Based on the latest law, subsidy payments "to renewable power plants,
(especially wind plants), with certain age, almost disappear. For newer
plants the new system pays the ‘recognized cost' which is an amount to
recover fixed cost and variable cost associated to capital cost,"
Professor Ciarreta said.
Furthermore, renewable power plants are now obliged to compete with
all other forms of energy in the wholesale market in equal terms. "All
the units must go through the pool. Renewable units are not the ones
indicated to be used as secondary or tertiary reserves. They sell as
much electricity as they can. Clearly, units that benefit are those with
low variable cost, while the price in the pool should remain low
because of the overcapacity of the system" Ciarreta added.
Most stakeholders agree that a new policy framework was needed to cut
the deficit and establish regulatory stability. But critics say the
reform didn't result in a convincing restructuring of the country's
wholesale and retail energy markets, rather it is a patchwork that
penalizes renewable power investments.
A crucial question is how Spain's energy mix will be decided. Given
that the new renewable energy policy obliges renewable power plants to
participate in the pool and compete in the wholesale market, one would
expect market forces alone would drive the country's energy mix but the
latest government announcement indicates that the opposite is happening.
The government will dictate the energy mix deciding the size and sort
of installations.
Specifically, the Spanish government appears to object to the
disruptive nature of smaller, distributed solar PV installations in
favor of the incumbents. But such policy aims are already outdated. The
emerging new energy landscape worldwide is moving toward a decentralized
power system that empowers the consumer and communities to make
decisions on a level-playing field.
Critics say that Spanish energy policy lacks the long-term vision
that will keep it up-to-date with the latest technological progress and
encourage future investments in the most market-friendly way, decided by
the consumer. Instead, the present policies, although by and large have
abolished the renewable power subsidies, are subject to favoritism and
lobbying, hindering consumers and businesses to make their own energy
choices.
http://www.renewableenergyworld.com/articles/print/volume-18/issue-4/features/solar/is-the-spanish-government-putting-the-brakes-on-solar-pv.html