The New York Times has run an editorial highlighting mistakes made by the Spanish government in subsidising their solar industry in recent years. While Spain was held up as an example of how strong feed-in tariff (FIT) laws can greatly encourage investment and growth within up and coming renewable industries, amendments made by President Zapatero’s government have caused a crash in the photovoltaic market in Spain.

The essential problem of the Spanish tariff which was introduced back in 2007 was that it had no long term provisions or ideas of how to be market reactive in the case of various investment paterns. The generous tariff offered 0.44 euros per kW of energy fed back in to the national grid. The Spanish government anticipated a steady investment pattern over a period of years, however, the media interest along with the high yields made possible by the tariffs caused a short term boom in the solar industry.

In response to the inundation of solar installations across Spain, the government was forced to make changes to the tariff system. With many already signed into investment scheme the government pulled the rug out from under them by reducing the tariff incentives by 30%. With investors already tied into long term deals and with large quantities of PV equipment already being shipped from manufacturing bases in China, many had there fingers burnt by a solar industry which had been created artificially over a short period of time.

Santiago Seage, the CEO of Abengoa Solar SA commented on the situation saying, “What’s important for the regulation of solar is stability. Unfortunately, up to now, we have had too many changes and if the context changes, you can make mistakes in business decisions.”

The Spanish lesson, as set out in the New York Times indicates clearly the need for a tariff which both encourages strong growth of the industry but also offers long term stability by not creating an artificial market with tariff levels which are too high. Germany perhaps offers the best example of long term stability with a healthy PV market capable of being market reactive.

With regards to market stability, Julie Blunden from the US company SunPower Corp was quoted in the New York Times as saying,

“The most important lesson, which everyone has learned, is that if you’re going to establish a feed-in tariff, you need to figure out how to make it market-responsive.”

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