Feed In Tariffs

Published on July 1st, 2010 | by Susan Kraemer

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Spain Considers Cutting Operating Hours For Solar Power Plants

July 1st, 2010 by  

The Spanish government, faced with runaway success in the rapid scale-up of solar power in the country as a result of its extremely generous Feed-in tariff payment, is now faced with a financial problem caused by the same extremely generous Feed-in Tariff payments.

It had offered as much as ten times the price per megawatt hour for these solar power plants, and was (rather surprisingly) surprised by the overwhelming response. Entrepreneurs built nineteen of the fifty biggest solar projects in the world there, lured by this largesse. So the problem is twofold. They are paying at too high of a rate, but even worse: they are paying for many more megawatt-hours of power than they expected to at that high rate.

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So even though these new solar plants are helping Spain (and the globe) by producing so much clean energy for electricity (and once paid for will add to Spain’s wealth by providing free energy) for now they are just costing too much for the government to continue to buy power from them at such high rates, because there are so many more of them than expected.

One option the government is considering is reducing the allowable operating hours of each solar power plant. Of course as long as the sun is up, the solar plant will be producing power. But the government would buy only those megawatt hours of electricity produced during a portion of those hours each day, instead of during all of them.

This solution brings up two questions.

Would the solar operators be allowed to sell their remaining production hours elsewhere? Would these qualify for carbon credits that individuals could purchase through organizations like Terrapass?

The other issue is that these contracts were for a guaranteed 25 years of production. If they shorten each days “payable hours” would they then spread the 25 year guarantee out longer – over 30 or 40 years?

Lawyers are certain to be busy, as this Royal decree will affect some 3,000 megawatts of solar that Spanish entrepreneurs installed in very short order in response to the incredibly good tariffs.

Image: Flikr user !Arturii!

Source: PV-Tech

Susan Kraemer @Twitter

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About the Author

writes at CleanTechnica, CSP-Today and Renewable Energy World.  She has also been published at Wind Energy Update, Solar Plaza, Earthtechling PV-Insider , and GreenProphet, Ecoseed, NRDC OnEarth, MatterNetwork, Celsius, EnergyNow, and Scientific American. As a former serial entrepreneur in product design, Susan brings an innovator's perspective on inventing a carbon-constrained civilization: If necessity is the mother of invention, solving climate change is the mother of all necessities! As a lover of history and sci-fi, she enjoys chronicling the strange future we are creating in these interesting times.    Follow Susan on Twitter @dotcommodity.


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  • I think that the most important thing to take from the Spanish example is that people are willing to implement green energies if they can make some amount of profit. Right now, there is a need for us to start actively pursuing alternative energy methods. Just looking at BP’s oil spill in the Gulf of Mexico makes this horribly evident. However, governments need to be smart about it. There is no use in sending countries deep into debt, because this will have an extremely negative impact on the world as well.

  • It is 2010. The clock is ticking. 2020 is only ten years away and it looks grim http://www.global-warming-forecasts.com/2020-climate-change-global-warming-2020.php

    Greenhouse gas emissions must stabilize by 2015 Earth because is warming faster than previously predicted. We are way behind schedule on this.

    Pursuing the “best” feed-in tariff solution may end up doing less actual good than accepting a solution that, while not perfect, is effective.

    The definition of victory is replacing fossil with non-GHG power producing technologies as rapidly as possible. By that definition Spain is doing just fine while the U.S. fiddles away.

    This should not be a low priority for California or the U.S., or India or China who are most responsible for this train wreck we are facing.

    Seneca

  • “Here in California, solar rebates are also going down as time goes on – to encourage early adopters to move fast and jump start the industry -($2,500 a KW is now down to only $600 a KW) but Spain’s incentives were much more extreme and unsustainable.”

    In Spain now they are paying 0,29€/kW. You say in california they are paying $600/MW ($600/kW must be a mistake), which means they pay 72% more than spanish goverment. ¿Why should it be more sustainable in California than it is in Spain?

    • No, this is different: kwh v KW. Spain was paying (mostly to commercial solar investors) on a Feed in Tariff, meaning every single kwh that gets pumped out gets a payment for 25 years, ten times what their utility charges per each kwh.

      The $600 per KW is what California offers, as a one-time rebate on just the initial cost of a rooftop solar install. The average Californian uses 550 kwh a month, so a 3 or 4 KW system is big enough to supply them their power. CSI pays about $1,800 to $2,400 ($600 per KW installed) to offset that initial investment of about $15,000 – $25,000 by the homeowner.

      It is a very good deal for California, as each system will produce clean power for 40 years, at no cost to the state. Or very tiny: $2,000 divided by 40 years – $50 a year.

      For each measly investment the state reduces (by that home’s need – about 6,600 kwh annually – for $50 a year) its need for new gas-fired electric power plants, safeguarding our water from fracking dangers that would cost more than $50 per year to fix.

      And it reduces our contribution to climate change that even with just the first three degrees rise in the last three decades, has already impacted our farming (most of our unemployment is driven by farm unemployment as high as 40%), and will end it by 2100 for many fruits and nuts now grown here, if we don’t act.

      http://bluelivingideas.com/topics/water-politics/oil-companies-anti-climate-ballot-initiative-clever/

  • Spain sure knows how to handle money.

    • True. 😉

      Long term, solar is a wiser (and cheaper!) investment than wars-for-oil in other nations, to meet a nation’s energy needs. Solar produces for at least forty years, a fuel-free energy. Short term, though, it was a gamble.

  • ArcticFireGuy

    How is paying 10 times the market value, of electricity that isn’t being used by the people, helping the planet…? I don’t get it. Good thing i’m not in charge because it doesn’t make much sense to me. But then, it must be good because the spending habits of the Spanish government made it possible for them to obtain entry into the EU. So thats a “good thing” right …? 🙂

    • Your fear that they are getting nothing because ‘it isn’t being used’ is unfounded. Under a Feed-in Tariff, the utility (or, in Spain’s case, the government) pays only for kilowatt hours of electricity that are actually put on the grid (where they get ‘used’).

      The electricity IS being ‘used by the people’, so it is helping ‘the planet’ ( it is helping people, actually, because it is people who won’t survive climate change, not the planet) because if not clean, then the people would have to use dirty energy. That is a danger to the people, long term. Ending food production in the Midwest, leading to cities like NYC having to be moved inland over the next five centuries, and so on.

      But, they sure overpaid. FITs generate investments at 2 x retail.

  • @Roger Interesting perspective. Here in California, solar rebates are also going down as time goes on – to encourage early adopters to move fast and jump start the industry -($2,500 a KW is now down to only $600 a KW) but Spain’s incentives were much more extreme and unsustainable.

    A Feed-in Tariff of 2x or at most 3x the rate should be enough to sustainably move investment.

  • I’m an engineer, and I’ve been designing solar power plants in Spain since the goverment aproved the first law that permited to install grid connected plants.

    The first Feed-in tariff was 575% the price of the megawatt hour. But it has been reduced since then. In the actual system of tariffs every 3 months the new installations get different tariffs which are going down.

    What they are trying to do will kill the sector of the renewable sources. Nobody will have confidence in it any more, and we will not grow any more in clean energy. The Earth will be the great looser of it!

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