Spain's Green Dreams Blow Up

Green dreamers in Spain once touted solar power as a cheap answer to their energy needs.  Then economic reality intervened: Spain's economy went from boom to bust -- and "green incentives" became too costly for the government (er, taxpayers).  As a consequence, Spain's cash-strapped government has drastically scaled back its generous "green" subsidies since the 2008 real-estate meltdown.

Now, green dreamers are getting more bad news: Spain's Parliament is expected, on January 1, to approve a levy on renewable-energy production intended for personal use, according to a Wall Street Journal article, "Spaniards Gird for Fee on Solar Power."  It's bad news for "a small but growing segment of the middle class: people who have joined a Europe-wide move toward self-sufficiency by installing solar panels in their homes and businesses," the article pointed out. 

Citing the case of Diego Nicolás, a 55-year-old auto mechanic, the Journal explains that he'd thought solar power would generate much of his own electricity and "lower his shop's energy bills enough to recoup the €42,000 ($57,000) investment within eight to 10 years."  Now, Nicolás says, he won't recover his initial expenditure for 16 years.

The green lobby is outraged.  But as the Journal explains, "Spanish officials say they are struggling to close a 'tariff deficit' -- the gap between the cost of running the country's electric system and the revenue it brings -- that has put a growing drain on public coffers as the economic downturn reduced electricity consumption."

Regarding the folly of solar power, the article explains:

Since Spain authorized self-production in late 2011, solar panels have been installed in as many as 5,000 homes and businesses across the country, people in the industry say. Some had been predicting that the estimated output, now less than 0.1% of the country's total, would grow tenfold by 2020.

The new levy puts those expectations in doubt. Households and businesses that stay connected to the grid for some of their electricity will also be charged a fee based on the power they generate for themselves. The fee is high, surpassing the wholesale price that Spain's electricity-market supervisor pays gas power plants for the electricity they generate.

The fine for an individual producer who fails to register or pay the fee is even higher -- up to €30 million, the equivalent to what a nuclear-power producer might pay for a radioactive leak that endangers public safety.

Spain's green dreamers, to be sure, had plenty of warning that something like this was coming.  Four years ago, the Journal published a prescient piece ("Spain's Solar-Power Collapse Dims Subsidy Model") that delved into the increasingly problematic aspects of Spain's quest for the widespread use of solar power.  The article explained:

Spain's hopes of becoming a world leader in solar power have collapsed since the Spanish government slammed the brakes on generous subsidies.

The sudden change has rippled across the global solar industry, in a warning of the problems that government-supported renewable-energy programs can encounter.

In 2008, Spain accounted for half the world's new solar-power installations in terms of wattage, thanks to government subsidies to promote clean energy. But late last year, as the global economic crisis worsened, the government dramatically scaled back those subsidies and capped the amount of subsidized solar power that could be installed.

Factories world-wide that had ramped up production of solar-power components found that demand for solar panels was plummeting, leaving a glut in supply and pushing prices down. Job cuts followed.

"The solar industry in 2009 has been undermined by [a] collapse in demand due to the decision by Spain," says Henning Wicht, a solar-power analyst at research group iSuppli.

Spain is providing important lessons for the U.S., where lawmakers are engaged in a debate about how to support renewable energy. Boosters of clean energy, including President Barack Obama, have pointed to Spain as a success story showing how government policies jump-started renewable energy, created new industries, and helped the environment.

There's nothing wrong with green dreams, of course -- so long as they make economic sense for the people (that is, the ordinary taxpayers) who have to fund them.

Green dreamers in Spain once touted solar power as a cheap answer to their energy needs.  Then economic reality intervened: Spain's economy went from boom to bust -- and "green incentives" became too costly for the government (er, taxpayers).  As a consequence, Spain's cash-strapped government has drastically scaled back its generous "green" subsidies since the 2008 real-estate meltdown.

Now, green dreamers are getting more bad news: Spain's Parliament is expected, on January 1, to approve a levy on renewable-energy production intended for personal use, according to a Wall Street Journal article, "Spaniards Gird for Fee on Solar Power."  It's bad news for "a small but growing segment of the middle class: people who have joined a Europe-wide move toward self-sufficiency by installing solar panels in their homes and businesses," the article pointed out. 

Citing the case of Diego Nicolás, a 55-year-old auto mechanic, the Journal explains that he'd thought solar power would generate much of his own electricity and "lower his shop's energy bills enough to recoup the €42,000 ($57,000) investment within eight to 10 years."  Now, Nicolás says, he won't recover his initial expenditure for 16 years.

The green lobby is outraged.  But as the Journal explains, "Spanish officials say they are struggling to close a 'tariff deficit' -- the gap between the cost of running the country's electric system and the revenue it brings -- that has put a growing drain on public coffers as the economic downturn reduced electricity consumption."

Regarding the folly of solar power, the article explains:

Since Spain authorized self-production in late 2011, solar panels have been installed in as many as 5,000 homes and businesses across the country, people in the industry say. Some had been predicting that the estimated output, now less than 0.1% of the country's total, would grow tenfold by 2020.

The new levy puts those expectations in doubt. Households and businesses that stay connected to the grid for some of their electricity will also be charged a fee based on the power they generate for themselves. The fee is high, surpassing the wholesale price that Spain's electricity-market supervisor pays gas power plants for the electricity they generate.

The fine for an individual producer who fails to register or pay the fee is even higher -- up to €30 million, the equivalent to what a nuclear-power producer might pay for a radioactive leak that endangers public safety.

Spain's green dreamers, to be sure, had plenty of warning that something like this was coming.  Four years ago, the Journal published a prescient piece ("Spain's Solar-Power Collapse Dims Subsidy Model") that delved into the increasingly problematic aspects of Spain's quest for the widespread use of solar power.  The article explained:

Spain's hopes of becoming a world leader in solar power have collapsed since the Spanish government slammed the brakes on generous subsidies.

The sudden change has rippled across the global solar industry, in a warning of the problems that government-supported renewable-energy programs can encounter.

In 2008, Spain accounted for half the world's new solar-power installations in terms of wattage, thanks to government subsidies to promote clean energy. But late last year, as the global economic crisis worsened, the government dramatically scaled back those subsidies and capped the amount of subsidized solar power that could be installed.

Factories world-wide that had ramped up production of solar-power components found that demand for solar panels was plummeting, leaving a glut in supply and pushing prices down. Job cuts followed.

"The solar industry in 2009 has been undermined by [a] collapse in demand due to the decision by Spain," says Henning Wicht, a solar-power analyst at research group iSuppli.

Spain is providing important lessons for the U.S., where lawmakers are engaged in a debate about how to support renewable energy. Boosters of clean energy, including President Barack Obama, have pointed to Spain as a success story showing how government policies jump-started renewable energy, created new industries, and helped the environment.

There's nothing wrong with green dreams, of course -- so long as they make economic sense for the people (that is, the ordinary taxpayers) who have to fund them.

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