Spain Hurts Solar With Plan to Penalize Power Producers

Spain plans to make consumers pay for the clean electricity they generate and use themselves, a move unheard of in any other market.

A new draft bill on power consumption includes a fee for electricity that’s generated by solar panels or other renewable sources and used on-site, the text shows. The draft is being reviewed by industry regulator CNE.

Spain is seeking to curb solar growth after payments to producers helped drive up power bills. The measures threaten its small-scale photovoltaic market, an industry in its infancy even as it booms in the U.K., Germany and North America. U.S. utilities have sought to limit payments for rooftop solar as they’re forced to credit producers for power not used on site.

“The decree is an attack to market freedom that aims to prevent people from competing with established utilities,” Jose Donoso, managing director of Spain’s solar lobby group UNEF, said in an interview. “It’s like if they charged you when you turn off electric heaters and use a wood stove.”

The bill will make self-generated solar power more costly than electricity bought from the grid, rendering such systems uneconomical, Donoso said. Consumers already pay grid-access fees that are enough to support the power network, he said.

Control Growth

Spain’s Industry Ministry, which announced power reforms on July 12 including income limits for clean-energy plants, said the new levy is needed because grid-connected consumers that can produce their own electricity also benefit from the back-up provided by the power system. The levy will help control growth in rooftop solar, minimizing its impact on the system, it said.

The government argues that Spain already has too much generation, since total capacity exceeds peak demand by more than 60 percent.

The move to make generators pay has prompted concern in Spain’s solar industry, which was counting on support for such projects to help it survive following the elimination of fixed subsidies for new clean-energy plants in 2012.

Countries in Europe are increasingly relying on solar self-generation to save electricity and help reduce subsidies for the technology. Solar installations have mushroomed as customers realize they can generate power for as much as half the cost of retail electricity and in many cases get paid for what they can’t use.

Compromises Needed

“Charging a fee for generating your own energy sounds absurd, but in the long term, passing a higher proportion of the cost of running the grid to low-income customers is also unpalatable,” Jenny Chase, head of solar analysis at Bloomberg New Energy Finance, said yesterday. “Compromises will need to be made on this issue in more countries than just Spain.”

Spain’s proposals also show the country won’t remunerate excess power. The regulator accepted feedback until July 30 and will issue a response on the draft bill by early September.

Environmental group Greenpeace has urged the government to scrap the bill, saying politicians have been cajoled by Spain’s biggest utilities.

The country has 100 to 150 megawatts of projects that produce power for use on-site, a fraction of its total solar generation capacity of more than 4,000 megawatts, according to UNEF. If the bill is passed, all existing plants will have to register and start paying the fee.

Payback Time

The bill extends the payback time for domestic solar systems to almost 35 years from about 12 years, according to UNEF. It will also extend the period for small and medium-sized plants to about 14 years.

Domestic installations with less than 10 kilowatts will have to pay 27 percent more than they would without the levy, the lobby estimates. The fee, which applies to all plants of 100 kilowatts or less, varies according to project size and may be modified in future, according to the draft legislation.

The government could control growth with a quota system limiting installations to as much as 400 megawatts a year, a level that wouldn’t affect the system, according to UNEF. “We’re not asking for subsidies, just that the new fee is scrapped,” Donoso said. “Such a tax doesn’t exist anywhere in the world.”

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