Industry Insight

Ongoing agony for Spain’s CPV sector

19 July 2010

While Spanish authorities have ended months of uncertainty in the renewable energy market with agreements on tariffs for CSP and wind power, the CPV sector is still struggling to strike an acceptable deal. Jason Deign reports

By Jason Deign in Barcelona

As Spain’s Minister for Industry, Tourism and Commerce, 53-year-old Miguel Sebastián is in charge of the energy market in the world’s ninth-largest economy.

That means he is also responsible for its image to the utilities, solar developers and investors.

But as far as CPV is concerned, he has found himself in a major pickle.

In May 2007, his Ministry (in fairness then headed by his predecessor) signed in the Royal Decree 661/2007 governing the energy sector.

To stimulate the introduction of renewables, it included a limited-time-only deal which was “very generous towards PV,” according to José María González Vélez, president of the Spanish renewable energy producers association APPA.

This led to a stampede to build plants before the cut-off point of September 30, 2008, with many operators investing over the odds to get their build-outs completed in time.

Around 40% of all the PV capacity worldwide was installed in Spain that year.

The push created jobs, gave Spain a lead in CPV and meant all was rosy… until the recession hit. Fast-forward to 2010 and Spain, along with many other countries, is shelving green concerns in favour of administrative cost-cutting.

Sebastián’s Ministry has PV tariffs in its sights and is locked in negotiations with a CPV sector which fears a slow death if its needs are not met. But the signs that all was not well have been around for some time.

Catastrophic year

After a catastrophic year for the industry—in 2009 Spain’s PV market lost 98.5% of its value, according to the photovoltaic industry association ASIF—the government started talking up the possibility of reviewing renewable energy tariffs and possibly back-dating the changes.

And in April the Secretary of State for Energy, Pedro Marín, launched an investigation into allegations of fraud in the sector.

Tomás Díaz, ASIF’s director of external relations, hints that the allegations may have been concocted to discredit an industry which was becoming a drain on public finances.

“It was an accusation that came from the Ministry, which said we were producing energy at night using diesel generators,” he says.

 “We were able to show that in practically every instance it was a case of metering errors or where a mixed-use plant had been improperly catalogued.”

Under siege, Spain’s renewable energy associations mounted a vocal defence of the industry and the wind power and CSP sectors have recently mapped out agreements, which satisfy the Ministry while providing a measure of security to operators and investors.

The CPV industry has thus far had less luck, with negotiations extending beyond an original July 1 deadline and now likely to conclude “sometime in the summer,” according to Emerging Energy Research solar power advisory analyst Josefin Berg.

The Ministry has a more definite view. “The negotiations with the photovoltaic sector are ongoing and we hope to reach an agreement before the end of the month,” says spokesperson Emilio Jarillo Ibañez.

“If not, the Government will unilaterally adopt the solution it feels is most appropriate.”

Sticking point

“The sticking point has been a proposed reduction in hours that the tariff applies to, which the associations consider a retroactive measure,” says José María González of APPA.

The sector’s argument is that the plants that were built ahead of the September 30 2008 deadline were based on the assurance of a given level of profitability and any subsequent changes in their recompense structure could be dangerous.

Tomás Diaz says: “There needs to be clarification on what is meant by ‘retroactive’.

“We consider it to be any measure which adversely affects the projected benefits for an investor.” 

To satisfy the government’s need for cost-cutting, the industry is instead suggesting that the authorities go after a number of operators that did not meet the September 30 deadline but were still admitted to the tariff scheme, according the Spain’s National Energy Commission.

“If the National Energy Commission has informed the Ministry of Industry of these irregularities, then the Ministry needs to apply the law,” says González.

In addition, ASIF’s Diaz says the sector is offering compromise on two other fronts. One is that tariffs may be reduced in coming years, providing a cushion for the industry while helping the government make cuts.

The other is a six-month moratorium on claiming premiums.

Improved negotiations

A recent pact on energy between the government and the main opposition party, the Partido Popular, coincided with an improvement in negotiations between the PV sector and the government, Diaz mentions, but all association spokespeople agree there is still a way to go.

There is also uncertainty over what types of PV may be penalised most harshly under any new regulatory regime.

“What we are worried about is legislation that favours built surfaces over land-based plants,” Diaz says.

And all the while, any dithering at the Ministry is doing nothing for the image of CPV and renewables in Spain.

“Everything depends on the outcome of these negotiations,” says Berg.

“But what has been going on has led to a lot of uncertainty about the market.”

Image: José María González of APPA

To respond to this article, please write to:

Jason Deign: mail@jasondeign.com

Or write to the editor:

Katherine Steiner-Dicks: steinercommunications@yahoo.co.uk