Spain - Primed for Solar PV

A CSP tower near the high-speed rail line taking me from Madrid to Seville.  It was so bright! You couldn't look directly into it. It reminded me of the All-Seeing-Eye of Sauron. 

Spain is a excellent example of a market with enormous potential for PV, but one that is shackled by obstructive government and vested interests. There are many horror stories in the utility PV segment of power plants being built based on overgenerous subsidies that never came, but I largely focused on the rooftop residential segment.

The combination of high grid prices and excellent solar irradiance makes Spain an amazing market for rooftop solar. The only problem is the government and the utilities. During my time in Spain, I learned more and more about the cozy relationship utilities have with the government. There are three main industries that hold the most sway in the Spanish government - telecoms, banks, and utilities.

However, despite all my fear-mongering about the Big Bad Utilities, a conversation over lunch today helped me look at things from a broader perspective.

One of the reasons why grid prices are so high in Spain, and thus solar is very competitive, is because utility companies massively overbuilt capacity before the 2008 global financial crisis. Spain in many ways was like California. Property prices were very high and houses and infrastructure were being overbuilt.

Due to the Franco dictatorship stretching from 1936 to 1975, the Spanish economy was less developed than much of north and west Europe. This meant that after 1975 when the dictatorship ended, money began pouring into Spain for them to "catch up". This is why the Madrid metro is much nicer and newer than many other metros in Europe's major cities. Additionally because Spain was less developed, Spanish labor was lower cost than much of Europe providing an economic edge.

All of this setup (on top a whole host of other reasons I am ignorant of) meant that the Spanish economy was quite frothy around 2008. Since the utility companies were projecting continued rates of high growth, they build large amounts of generation capacity to provide power over the next 30 years.

As we all know now in 2014, the high growth rates were not meant to last. Quite the opposite. Only recently has Spain returned to non-negative rates of growth. This has meant that the real demand for electricity now is far below the actual capacity. The utilities thus have a bunch of stranded assets they are trying to recoup their investments from. When the volumes of electricity decrease, the prices must increase to maintain revenues and that is what has happened.

Not only has the price of solar power decreased dramatically in the last 5 years, but the prices of electricity in many developed countries have increased for the same reason as is the case in Spain.

Now this means the market is primed for a large uptake of residential solar. Homeowners could dramatically cut their bills by going solar. However, from a system perspective, adding even more capacity doesn't make sense. This was the new perspective I gained today.

I don't know which perspective is correct, but both are worth considering.

A view from my apartment in Madrid.