The Spanish PV market is growing, but will it grow like the German market did up to last year? It became clear during the SolarPlaza PV Business Tour Spain 2006 that Spanish stakeholders are all optimistic about future market growth. They do not fear the recently announced revision of the attractive feed-in tariff due to the published in the 7/2006 Royal Decree.
By: Edwin Koot; director of SolarPlaza.com
November -- The Spanish PV market is growing, but will it grow like the
German market did up to last year? It became clear during the
SolarPlaza PV Business Tour Spain 2006 that Spanish stakeholders are
all optimistic about future market growth. They do not fear the
recently announced revision of the attractive feed-in tariff due to the
published in the 7/2006 Royal Decree.
The government agency IDAE estimates that some 15 MW of solar PV power has been installed in 2005 bringing the total cumulative installed power to 52 MW. Though not impressive, the figures might double in 2006 and each year that follows. 2006 might bring another 50 MW ‘online’ to the grid and in 2007 and 2008 these numbers could again grow by 100% if we look at the announced initiatives and contracts for new projects.
of this growth will come from Huerta Solares projects; large solar
farms with many individual PV systems ranging from 5-100 kWp. The PV
systems are owned by private investors.
The attractiveness of the
Spanish PV market is based on the 436 Royal Decree of 2004 providing a
feed-in tariff that is linked to the energy price (TMR). Nowadays, this
tariff is 575% of the TMR and about € 0.44 per kWh of solar energy.
Aside from the amount that this tariff has reached, the attractiveness
is related to the guarantee of 25 years and the yearly correction of
the TMR based on inflation. Power plant projects are able to generate a
profit and an IRR of 10% that is guaranteed for 25 years with this
feed-in tariff PV. It, therefore, does not come as any surprise that
many new initiatives are being taken in this field. Not surprisingly,
this is often by people from the property market. They know the way to
purchase land and are used to working with local governments and
permits. They are also looking for new business opportunities and
plenty of cash is available. The Spanish property market is not as
attractive as it was over the last decade and, therefore, solar PV
provides an attractive investment alternative.
New PV legislation
new government plan for Renewable Energy (PER) aims for another 363 MW
of PV to be installed by the year 2010. This number should be within
reach before 2010. Recently, the new Royal Decree (7/2006) has caused
some rumors in the PV market. International publications even mentioned
that the growth of the Spanish market might even stop. But interviews
with and presentations by Spanish PV companies and insiders have shown
that they remain very confident in continued market growth. The
expectation is that the revised feed-in tariff will remain attractive
for large-scale PV applications. This Royal Decree announced that there
will be a review of the 54/1997 Royal Decree (Energy Regulations)
within 6 month with possible implications for the 436/2004 Royal Decree
(feed-in tariff). The revision will be published within 2-3 month from
now and will only become effective in the second year after
publication. Should the revision take place before the end of this
year, the new feed-in tariff will, therefore, not become effective
before 1 January 2008.
What type of change can we expect?
have seen drafts of the revised Royal Decree and have sent in their
remarks. Now a second draft is being made and it seems that the
included new feed-in tariff for PV will be lower but still attractive.
Also, the tariff may be fixed for a period of 25 years instead of
having the current yearly inflation correction. Another expected
revision will be a real improvement. Stakeholders think the general
target could increase to 1000 MW and that the 100 kWp limit will be
removed. This would make it possible to develop large PV power plants
making use of the high feed-in tariff category. This would remove the
obligation to set up individual systems and companies for each 100 kWp
system including all the necessary administrative (separate permits,
notary filing) and technical (separate transformers) work this involves.
was all the international fuzz about? Some said it could be that
Spanish industry associations have used the international press to put
some pressure on the national government to continue the feed-in tariff
for PV at a reasonable level providing opportunities for continued
In general, market players are confident about the
PV policy of the government. They argue that Spain has gained an
interesting position in the global solar industry and that the Kyoto
obligations still have to be fulfilled. Left-wing politicians are very
happy in connection to the fact that the Renewable Energy sector has
created many new jobs. Recently, the new Minister of Industry
responsible for energy was sworn in. This former Barcelona mayor was
the initiator of solar PV stimulation programmes in this city.
Other new legislation….
new 314/2006 Royal Decree provides a Technical Building Code (TBC) that
enforces (as of 29 September) the installation of PV on new large
buildings, such as offices, government buildings, hospitals, etc.). The
government agency IDAE estimates that this Decree will result in some
68-93 MWp of PV installations as part of the planned 363 MW target
until 2010. The aim of this Decree is to stimulate integrating PV into
buildings. The PV system should be part of the building design like any
other installation and has to be part of the building permit granted by
the local administration. The amount of PV to be installed can be
calculated by applying a specific formula.
local building permission for a “Huerta Solar” project could imply the
involvement of the local mayor since most projects are located in
smaller villages. The mayor and local administration are not familiar
with PV and national and regional legislation related to PV. This
requires educational talks and negotiations. As the mayor needs
permission of local residents, these people and the mayor are often
first invited to invest in the new Huerta Solar project where, of
course, they are offered attractive discounts.
|How quickly can the Spanish market grow?
Since modules are no longer really scarce and actual market growth depends fully on how quickly permits for a PV power plant project can be obtained. This differs per Spanish region. In practice, the time needed to arrange local environmental permits varies between 8 to 24 months. Not only do procedures vary per region, the influence of local municipalities cannot be underestimated either.
If these local
permits would no longer be an obstacle in the development process of
Huerta Solar projects, the number of projects could explode and easily
lead to sales of more than 100 MW in 2006 and several hundred megawatts
next year. The trade of land with permits is now an emerging market in
Spain in view of this situation.
Spanish people with land (usually
farmers) have discovered the PV sector and view it as a business
opportunity. They apply for a grid connection point at the energy
utility company without full knowledge and detailed plans. This has
created a backlog of thousands of megawatts of applications. Their idea
is quite often to sell the land with a granted permit for a few euros
above the normal price for land, which often is only valued at a few
eurocents per square metre. Without any detailed plans and local
building permissions, this “product” is hard to sell. Only when you
have obtained all the required permits for a PV project will the land
become very attractive for trade in the PV market.
To educate a
market takes time. With many mayors and local authorities that still
need to be educated, expectations are that the Spanish market growth
will be reasonable but not extremely high during the coming years. And
let’s be realistic: even to achieve the goal of 400 MW by 2010 would
need a year-on-year market growth of 55%. Not bad at all for any market
or industry! Should the Solar Industry Association ASIF be rewarded for
its efforts to raise the target to 1000 MW of PV in Spain, the needed
growth will be more than 100% every year.