Solar Power is Alive and Kicking in Spain, but Flawed Electric Power Act Needs Correcting

A hangover of bad debts from a speculative real estate/property boom threatens to overwhelm Spain’s banks, the national government, and the entire economy, potentially bringing the demise of the single European currency, the euro, along with it. Generous feed-in tariff (FiT) rates for solar and wind energy also led to a boom in Spanish renewable energy, one that’s been deflated as a result of the fiscal austerity that the Spanish government has subsequently been forced to take.

That’s not to say that its FiT hasn’t created lasting benefits and value for the Spanish, or for Spanish commercial enterprises. Spanish installations of utility-scale and distributed solar and wind energy systems will produce clean, renewable electrical power for decades to come, helping insulate consumers from rising fossil fuel costs. They’re also making big cuts in CO2 and greenhouse gas emissions, as well as all the other forms of environmental pollution fossil fuel use brings. That’s not to mention all the political pecadillos (use of euphemism here) that will be avoided.

Renewable energy has also been a rare bright spot for Spain in terms of investment and job creation, which stands out starkly given an unemployment rate of some 25%. Spanish companies such as Abengoa, Gamesa, and Iberdrola, among others, have become leading multinational players in the solar, wind, renewable energy and clean technology markets, contributing significantly to growing renewable energy use around the world.

A Bright Spot in an Otherwise Gloomy Picture

Solar and wind installations continue to be built in Spain despite the debt/credit crisis. Abengoa yesterday announced the that Helios 1 — the first of two parabolic trough concentrated solar power (CSP) plants — went live at the Castilla-La Mancha Solar Complex.

The Castilla-La Mancha Solar complex consists of two identical 50-MW CSP plants. Outfitted with 360 parabolic solar collectors installed over an approximately 110 hectare (280 acre) area, Helios 1 will produce enough clean, renewable electricity to power some 26,000 Spanish households, all the while substantially avoiding CO2 and greenhouse gas emissions — some 31,400 tons of CO2 per year, according to the company.

Abengoa’s become a world solar power leader, having an installed base of solar capacity totaling 593 MW in commercial operation, as well as 1,060 MW under construction across Europe, the US and Africa.

“For the first time in its history, Spain occupies a position of leadership in a major technological-industrial sector of growing importance worldwide. In our country, the renewables sector directly employs over 120,000 people, generates 1 % of GDP, and invests 2.67 % of its contribution to GDP towards R&D; more than double the national average,” writes Abengoa chairman Felipe Benjumea.

“Spain is a world leader in solar thermal technology which provides employment for 25,000 people, with the vast majority of jobs found in regions with higher unemployment rates, and also enables the curbing of burdensome imports of fossil fuels. Spanish companies are building more solar thermal plants abroad than inside Spain, maintaining higher value-added activity in our own country with the resulting development in other sectors, payment of the corresponding taxes, job creation, and the exportation of cutting-edge technology.”

Electric Power Act Flaws Benefit Nuclear, Hydropower at Consumers, Environment’s Expense

Spain still relies on volatile, increasingly expensive and polluting fossil fuels for around 70% of its power needs, the overwhelming majority imported. Moreover, the FiT for solar and renewable energy has not contributed significantly to Spain’s so-called “Tariff Deficit” and debt problems. If anything, it’s been a flaw in Spain’s Electric Power Act that allows nuclear and hydro power providers to charge rates indexed to the rising costs of fossil fuels that have added to Spain’s fiscal shortfalls, according to Benjumea.

The FiT rate premium for Spanish nuclear and hydro allow providers is inflated, allowing them to sell electricity from nuclear and hydropower plants to consumers and the public through the government, at rates correlated not to their cost of production, but to the market price of oil.

“They have sold their energy at very high prices, benefiting from rising oil prices and producing the paradox that the higher the price of oil the dearer the sales price of hydro and nuclear energy in Spain. This is what has caused the €24,000m ($36 million) deficit in recent years,” according to Benjumea. “Of course, this would never have happened had the previous Government tackled the problem eight years ago.”

The first step the Spanish government should take to remedy the situation and help alleviate Spain’s debt crisis is for the government to deduct the amount it’s overpaid to nuclear and hydropower providers over the years from what’s currently owed to them, Benjumea asserts.

Too right, particularly in light of the fact that Spain’s Electric Power Act was, at least at first glance, was formulated to boost sustainable economic and jobs growth, enhance Spain’s energy security and reduce greenhouse gas emissions and environmental degradation.