Spain's Ambitious Solar Program Facing Budget Cuts

Spanish solar power tower

Spain has long been celebrated as a leader in solar power generation. The country, which covered 2.8% of its electricity demand in 2009 with solar energy, is the fourth largest manufacturer of solar power technology in the world. This success can largely be attributed to a 2007 law that offers 25 years of above-market price guarantees to solar developers. Now that Spain is teetering on the brink of bankruptcy, the government may abolish that law--potentially bringing down the country's solar industry along with it.

BusinessWeek explains:

The industry ministry, after negotiating with trade groups for weeks, plans to reduce the number of hours a day during which they may earn subsidized prices for clean energy, said Tomas Diaz, director of external relations at the Photovoltaic Industry Association in Madrid. The decision, which hasn’t been approved by the cabinet, would mean bankruptcy for most of Spain’s 600 photovoltaic operators, Diaz said.

The damper on renewable energy isn't limited to Spain. The National Post reports that Germany is also cutting back on renewable energy subsidies, while Italy is getting rid of guaranteed pricing for owners of "green certificates" that are given out to clean energy producers--a move that could prevent solar and wind companies from paying back some $6 to $8 billion in loans.

Spain's proposal isn't a sure thing yet, but if it goes through, we can expect fewer ambitious solar projects from companies like Abengoa Solar (built the world's biggest solar power tower near Seville) and ACS group (built Europe's first parabolic trough commercial power plant in Granada). We'll also see what happens to a country that has built a massive--and progressive--industry almost entirely using government subsidies.

Ariel Schwartz can be reached on Twitter or by email.

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