June 1, 2012 / 12:28 PM / 5 years ago

RPT-COLUMN-Austerity Spain to test subsidy-free solar: Wynn

(The author is a Reuters market analyst. The views expressed
are his own.)	
    By Gerard Wynn	
    LONDON, June 1 (Reuters) - Short of cash but rich in sun,
Spain is about to test the future of solar power as developers
forge new projects even after the country culled all support for
renewable energy in January. 	
    The notion that solar will soon compete with fossil fuels
without subsidies, and help crack global challenges of energy
security and climate change, has been around for several years. 	
    Now the scene is set finally to test the theory.	
    Subsidies were a natural target in Madrid's fight to hack
back debt, given that its past energy support has left it
nursing a 30 billion euros ($37 billion) liability. 	
    Slumping solar equipment prices have sharpened anticipation
of an era of unlimited, low-carbon energy which will ultimately
make nuclear and fossil fuel power obsolete. 	
    Solar power so far accounts for less than 1 percent of the
world's electricity. 	
    Spain is the ideal test: as well as now having zero
subsidies, the country has the strongest solar radiation in
Europe alongside Portugal and southern Italy, plus local
governments anxious to grab jobs and inward investment.	
    In the past three months developers have announced plans for
five massive projects aiming to compensate for a lack of
financial support with sheer economic scale. 	
    No-one supposes that solar power is about to become
competitive everywhere. Its supporters argue it should be
supported in any case, because it is zero-carbon and less
polluting than burning fossil fuels.	
    But proof that it could stand on its own feet would boost a
global sector whose manufacturers at best are struggling with
over-capacity, squeezed margins and dwindling government
support, and at worst going bankrupt or being mothballed.	
    And proven, self sufficient solar power may make the
prognosis of a world struggling to make ends meet, with a
looming energy crunch and "peak everything", appear a little
less bleak.	
    	
`    	
    FIVE PROJECTS 	
    Solar developers have announced plans for at least five
utility-scale photovoltaic (PV) projects.	
    These should be viewed sceptically: the plans are light on
detail, lighter on commitments, and should be seen in the
context of cash-strapped authorities eager to drum up economic
noise.	
    In particular, two of the country's sunniest regions
Extremadura (southwest) and Murcia (southeast) appear to be
facing off by supporting plans each bigger than the last. 	
    Support would be given by expediting permission, rather than
financial. 	
    Last month, the government of Extremadura said it had signed
"a collaboration agreement" with the developer ecoEnergias del
Guadiana, to streamline approval for a solar PV park of "more
than 500 megawatts (MW)", targeting operation in 2014. 	
    That nominal capacity is half a nuclear power plant and more
than twice the size of the world's biggest solar PV plant in
China. There are several plans for 500 MW plants in California,
all subsidised.  	
    Also last month, Extremadura signed an agreement for a 400
MW solar PV project with developers Germany-based SAG Solarstrom
 and Spain's Valsolar. 	
    In Murcia, the Spanish installation company Andaltia said it
signed a memo with module manufacturer SunPower and
developers Schneider Electric to build 400 MW, to start
construction next year.	
    In April, the government of Murcia signed a deal with the
Spanish arm of Germany's Wuerth Solar GmbH & Co. for the
construction of up to 287 megawatts.	
    And in March, Germany's Gehrlicher Solar said it signed a
memo with Extremadura to build a 250 megawatt park, starting
construction in the second half of next year. 	
    	
    WILL THEY HAPPEN?	
    In all, these projects add up to 1,837 MW, about 2 percent
of Spain's installed power generating capacity. 	
    But there are many steps and hundreds of millions of euros
between signed a memorandum, issuing a press release and
building a world record solar park.	
    There are question marks, for example, over who would buy
the power: Spanish consumption peaked several years ago, and the
country is already on track to meet a 2020 carbon emissions
target. 	
    It will come down to economics: Spanish industrial power
prices last year were 116 euros ($140) per megawatt hour,
according to Eurostat, while the solar sector is talks about
achieving $120 per megawatt hour in the sunniest spots.	
    An industrial energy user would make a profit signing a
long-term power purchase deal with a solar park at such prices. 	
    Spanish wholesale power price are much cheaper, however, at
around 54 euros day-ahead baseload, suggesting no incentive for
a utility to contract.	
    Either way, it seems there's momentum to build and with
solar power prices falling, it's now a question of watch this
space. 
($1 = 0.8088 euros)	
	
 (Reporting by Gerard Wynn; Editing by Anthony Barker)

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