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Spain has been one of the most successful countries in the public promotion of electricity from renewable energy sources (RES-E) , particular ly wind electricity. This support has been based on a feed-in tariff (FIT) scheme. Although the basic structure of the system was implemented in 1998, it has been modified in 2004 and 2007.

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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.”

The recent introduction of a solar feed-in tariff by the Turkish government designed to kick start the photovoltaic (PV) sector has been heralded by Sharp Solar as the beginning of what will be solar boom in Turkey. Tariffs work by offering fixed, premium rates for small scale energy producers feeding electricity into the national grid.

The rates are designed to off set the obvious costs in producing electricity by renewable means and have proved to be a useful mechanism in attracting investment where they have been introduced elsewhere. Sharp Solar therefore believe that the tariff legislation along with the abundance of sunshine enjoyed by Turkey will contribute to the growth of their PV sector over the next ten years.

Peter Thiele, Executive Vice President of Sharp Energy Solutions stated this week that,

“There can be few countries in Europe that have as much growth potential as Turkey when it comes to the solar market”.

The tariff will operate in Turkey over a twenty year period with a rate of €0.28 per unit of energy for the first ten years and a rate of €0.22 for the following ten years being offered to solar micro-generators across Turkey. With an average of seven hours of sunlight per day, Turkey will prove to be an attractive prospect for investors looking to diversify their portfolios in green investments and similarly will help create PV jobs in the region.

With highly regarded investment gurus such as Jim Mellon adding their weight to the concept of solar investment, Turkey will be looking to benefit from what he described as an industry which will be ‘bigger than the internet’. Sharp Solar certainly agree with the idea that the Turkish feed-in tariff will lead to a solar industry boom in Turkey,

“Turkey has long been one of Sharp’s European focus markets for photovoltaics. Together with our partner FORM Solar we have been active in this market for a number of years and are keeping a close watch on developments. The 28 euro cent feed-in tariff for solar energy agreed for the first ten years, with 22 euro cent during the next ten years will, we believe, ensures a start of a healthy development of the market without the risk of overheating as was witnessed in Spain for example, but could be improved in order to generate more interest of investors,” quoted Barbara Rudek, Sharp Energy Solution Europe.

With the British government currently assessing the details of the feed-in tariff which is to be introduced in 2010, they will undoubtedly heed the example of Spain and the way in which the government there failed to live up to the initial expectations of the tariff. Spain, despite having one of the strongest photovoltaic sectors in the world, failed to capitalize on the successes of the solar industry there by changing the way PV investment was subsidized, something which has led to a steep decline in photovoltaic investment and installation in that country.

In conjunction with the global financial crisis which has taken a particularly strong hold of the Spanish economy, the reduction in solar investment has contributed to a culling of jobs and cutbacks in PV manufacturing in Spain, something which will see a surplus of PV plant being exported to growing solar sectors elsewhere in the world.

Industry insiders in the UK have put pressure on the government and lobbied the Department of Energy and Climate Change by expressing the importance of a feed-in tariff which stimulates sector growth by offering incentives and security to investors. It is generally accepted that a tariff rate of at least 20p per unit of electricity fed-in to the national grid by small scale energy suppliers would be sufficient in part to kick-start the solar industry in the UK following its inauguration in 2010.

Certainly, elsewhere where comprehensive feed-in tariff legislation has been introduced there have been marked successes in the uptake of photovoltaic technology and job creation in renewable industries. In Germany for example, the feed-in tariff legislation has proved to be consistent and generous in the provisions offered to those wishing to invest in the German green sector. Indeed, the German tariff model is often held up as an example of how to incentivise investment and build public awareness.

Spain is expected to experience a dramatic reduction in photovoltaic installation in 2009 with 375MW compared to 2008 installations of 2,500MW. Spain will now fail to live up to its ambitions of becoming the European Union’s leading renewable energy producer by 2020 largely because the Zapatero’s government has neglected the tariff scheme across the country. The introduction of a 500MW project cap along with the withdrawal of essential subsidies has seen the solar industry stagnate and since the new year, decline. Members of the solar industry in the UK will therefore be hoping that the British government follows the example of Germany rather than Spain in the way that they choose to roll out the much talked about feed-in tariff next year.