Residential Solar & the Spanish Government: Choking an Industry
High electricity prices, great sun, and the recent drop in solar panels prices has made residential solar power cheaper than grid electricity in Spain. [1] However, the Spanish government and the main utility companies have drafted legislation to squash the nascent residential solar industry with a hefty fee for using solar power. The government is considering giving inspectors - solar police - the right to enter homes without a court order to enforce the law. [2]
The photovoltaic industry in Spain has stagnated since the cuts in the overly generous FITs in 2009. Even though new built utility scale solar power is now roughly half the cost of combined cycle gas plants in Spain, the build up of power plants before the economic crisis and decrease in electricity demand post-crisis has produced an overcapacity in the electricity market. [3] Due to the political uncertainty stemming from the €26 B ($35 B) electricity tariff deficit, the utility scale segment of the PV industry is unlikely to see growth in the near future. However, the residential segment at first inspection appears much more promising.
Currently, Spain has the fifth highest prices of electricity in the Euro zone at €0.21 ($0.28) per kWh.The tariff deficit stemming from government restrictions on rate increases is expected to be paid by consumers, which almost guarantees electricity prices will continue to increase. This sets up a perfect opportunity for homeowners to use solar power as a hedge against increases in energy costs.
The residential market is Spain has few frills. The government has a support scheme, but it is underfunded and has little impact on the market. There is no net metering policies and only in 2011 did the government allow homeowners to feed electricity back into the grid. The Spanish grid is not particularly robust making it difficult for inverters to feed electricity back into the grid. If the government wanted to aggressively pursue a net metering policy (which it does not), it would first need to upgrade the grid. Solar system's are bought by homeowners upfront often with bank loans, as there is no third party financing as in the US. A residential solar system in Spain can reduce electricity costs by 30-40% and can have a payback around 7-8 years making it an attractive investment for many homeowners and small businesses. [4] Tim Harman of Solosol Energy, a residential installer based in Granada, explained that customers increasingly cite environmental concerns as their main motivation for buying solar power above the reduction in electricity costs. The sun seems to be shining on residential solar power, but ominous, dark cloud are forming on the horizon.
The Spanish government has drafted legislation in its most recent electricity market "reform" that seeks to penalize residential solar power connected to the grid. The legislation is expected to be passed in January, so nothing is set in stone. The legislation creates a 6 c€/kWh fee to be levied on all solar power generated by homeowners who are connected to the grid. If homeowners fail to pay the fee, they could be fined anywhere between €6,000 - €30 M. The Local, a Spanish newspaper, recently described a proposed method of enforcement in their article "Spain's Solar Police to Kick in Your Door". The government is proposing to give inspectors the ability to enter homes without a court order and all seize all documents relating to energy consumption. [2] Finally, to monitor the solar systems the utilities will require the homeowner to pay for a wireless meter to monitor their consumption.
The utilities argue customers using grid connected solar systems are not paying for the full cost of the grid. In fact, Piet Holtrop of Holtrop SLP, a law firm bringing several cases against the Spanish government's policies concerning solar power, explains solar power users will be paying for the grid three times. Homeowners pay for the grid when they instantly consume electricity produced by their solar panels even though the electricity does not go onto the grid. They pay again when they have a surplus of solar electricity that must be exported to the grid and then a third time when they take that surplus electricity back from the grid. All of this process takes place on the local distribution network and does not use the larger distribution network or the transmission lines. A regular utility customer, on the other hand, only pays for the grid once when the electricity enters the home even though that electricity has traveled for miles from the distant power plants to the customers home.
The real concern for utility companies is that customers with PV systems buy less electricity. The utility companies simply hang the €26 B tariff deficit over the heads of the government (which they are partial responsible for creating - more on that later) and the government seems willing to sacrifice the Spanish people's right to produce their own electricity. The government is especially sensitive to anything to do with it's public finances. The intentions of the utilities is to discourage the use of solar power and the legislation is design to do just that.
Tim Harman said the payback period of a residential PV system could jump from 7-8 year to as much as 20-25 years, decimating the growing industry. Perhaps even greater than the actual fees is the threat that the government could again raise costs for residential users. Many homeowners will be too uncertain to invest in something that may never pay itself back due to government intervention.
There is still hope that this legislation won't be passed. A grass roots movement is rising up to oppose the government's actions to penalize solar. If the legislation is passed, the organizations will mount a civil disobedience campaign during the next election year in 2015. The group will refuse to pay the government's fees and communalize all fines. I will be writing about the civil disobedience campaign in detail in another post.
The photovoltaic industry in Spain has stagnated since the cuts in the overly generous FITs in 2009. Even though new built utility scale solar power is now roughly half the cost of combined cycle gas plants in Spain, the build up of power plants before the economic crisis and decrease in electricity demand post-crisis has produced an overcapacity in the electricity market. [3] Due to the political uncertainty stemming from the €26 B ($35 B) electricity tariff deficit, the utility scale segment of the PV industry is unlikely to see growth in the near future. However, the residential segment at first inspection appears much more promising.
Currently, Spain has the fifth highest prices of electricity in the Euro zone at €0.21 ($0.28) per kWh.The tariff deficit stemming from government restrictions on rate increases is expected to be paid by consumers, which almost guarantees electricity prices will continue to increase. This sets up a perfect opportunity for homeowners to use solar power as a hedge against increases in energy costs.
The residential market is Spain has few frills. The government has a support scheme, but it is underfunded and has little impact on the market. There is no net metering policies and only in 2011 did the government allow homeowners to feed electricity back into the grid. The Spanish grid is not particularly robust making it difficult for inverters to feed electricity back into the grid. If the government wanted to aggressively pursue a net metering policy (which it does not), it would first need to upgrade the grid. Solar system's are bought by homeowners upfront often with bank loans, as there is no third party financing as in the US. A residential solar system in Spain can reduce electricity costs by 30-40% and can have a payback around 7-8 years making it an attractive investment for many homeowners and small businesses. [4] Tim Harman of Solosol Energy, a residential installer based in Granada, explained that customers increasingly cite environmental concerns as their main motivation for buying solar power above the reduction in electricity costs. The sun seems to be shining on residential solar power, but ominous, dark cloud are forming on the horizon.
The Spanish government has drafted legislation in its most recent electricity market "reform" that seeks to penalize residential solar power connected to the grid. The legislation is expected to be passed in January, so nothing is set in stone. The legislation creates a 6 c€/kWh fee to be levied on all solar power generated by homeowners who are connected to the grid. If homeowners fail to pay the fee, they could be fined anywhere between €6,000 - €30 M. The Local, a Spanish newspaper, recently described a proposed method of enforcement in their article "Spain's Solar Police to Kick in Your Door". The government is proposing to give inspectors the ability to enter homes without a court order and all seize all documents relating to energy consumption. [2] Finally, to monitor the solar systems the utilities will require the homeowner to pay for a wireless meter to monitor their consumption.
The utilities argue customers using grid connected solar systems are not paying for the full cost of the grid. In fact, Piet Holtrop of Holtrop SLP, a law firm bringing several cases against the Spanish government's policies concerning solar power, explains solar power users will be paying for the grid three times. Homeowners pay for the grid when they instantly consume electricity produced by their solar panels even though the electricity does not go onto the grid. They pay again when they have a surplus of solar electricity that must be exported to the grid and then a third time when they take that surplus electricity back from the grid. All of this process takes place on the local distribution network and does not use the larger distribution network or the transmission lines. A regular utility customer, on the other hand, only pays for the grid once when the electricity enters the home even though that electricity has traveled for miles from the distant power plants to the customers home.
The real concern for utility companies is that customers with PV systems buy less electricity. The utility companies simply hang the €26 B tariff deficit over the heads of the government (which they are partial responsible for creating - more on that later) and the government seems willing to sacrifice the Spanish people's right to produce their own electricity. The government is especially sensitive to anything to do with it's public finances. The intentions of the utilities is to discourage the use of solar power and the legislation is design to do just that.
Tim Harman said the payback period of a residential PV system could jump from 7-8 year to as much as 20-25 years, decimating the growing industry. Perhaps even greater than the actual fees is the threat that the government could again raise costs for residential users. Many homeowners will be too uncertain to invest in something that may never pay itself back due to government intervention.
There is still hope that this legislation won't be passed. A grass roots movement is rising up to oppose the government's actions to penalize solar. If the legislation is passed, the organizations will mount a civil disobedience campaign during the next election year in 2015. The group will refuse to pay the government's fees and communalize all fines. I will be writing about the civil disobedience campaign in detail in another post.
