Tuesday, September 03, 2013

The Sun Never Shines On Solar Energy

Between 2006 and 2008, almost 30,000 solar farms were built across Spain. They were the eco-friendly symbols of a renewable-energy policy that made Spain the second largest producer of solar power in the world and they were facilitated by subsidies and the anticipation of spectacular returns on investment. By 2009, police authorities, public prosecutors and investigating judges were reaping their own rewards from Spain's solar boom; they were gainfully employed in pursuing cases of "eco-corruption".

The boom was also fuelled by the issuing of licences to both build the farms and to connect to the grid system. Land where connection points were to be created to dump solar energy into the grid became highly sought after, as was the information as to where these connection points would be. Trafficking in licences resulted as did the trafficking of money; a bent construction industry was able to launder illegal earnings into this new boom market and to look forward to even greater earnings in the process.

At the end of 2010, the Spanish Government stated its intention to attack the so-called "tariff deficit", which is the debt incurred from the cost of running the nation's electricity system relative to revenues from the sale of energy. The government wished to do so in order to be able to cut consumers' energy bills by 2013. In May this year, the tariff deficit stood at 26 billion euros. At the end of 2010, the deficit was said to have been 14.6 billion euros.

An economic fiasco brought about by the apparently benign intention to develop clean, green energy was being forecast even before prosecutors started to dig into corrupt practices by public officials and construction companies eyeing up more than just nice little earners from solar. The Zapatero administration was being fingered for its economically unsustainable but ecologically idealistic policies. Subsidies in the form of the premiums paid for solar-generated electricity outstripped by ten times the payments for conventionally supplied energy. Though the Zapatero government decided to cut revenues earned by photovoltaic plants by 30% at the back end of 2010 (thus delivering a blow to the renewables industry and its own green policy), subsidies did not end. They have continued under the current government.

If government policy was already well under scrutiny before "eco-corruption" reared its ugly head, less attention was paid to the private sector and in particular to the role of the banks. As with other construction projects, the banks started to chuck money around to speculators. Spanish financial institutions are said to be in for some 20 billion euros worth of loans to renewables projects.

The banking system, still attempting to right itself from the fallout of debt toxicity brought about by its zealous funding of the construction boom and by cheap and unsupportable loans, now faces a further potential crisis - that of default by solar companies which will have subsidies slashed. Tackling the tariff deficit is one aim, another is to cut the amount of solar power that is generated - its capacity exceeds demand by 60%.

In the Balearics, there was a scheme by which the regional government was issuing grants of up to 30% of the cost of renewable-energy installations by householders. The period for applications for these grants ended in January last year. By this time, national government was already putting in place plans to tackle the deficit and excess solar capacity, part of which came from householders' own excess energy being sold to producers.

Such sales will now stop. But more than just stop paying householders to help supply the electricity system, these same householders will, under new laws, be obliged to connect solar panels to the grid. Why? In order to tax the use of solar panels. The result will be that it will become more expensive for households to use solar than to take from conventional energy supplies. And if consumers don't hook their panels up, they will be liable to fines running into the millions.

The absurdity of the situation beggars belief. Legal challenges are bound to result and they may include those in the Balearics, where there was the recent incentive scheme which now turns out to be all but worthless. It is a situation that has come about because of the government's desperate need to cut the tariff deficit, one that it, and not consumers, caused and because of governmental idealism that wished to use an energy supply that is available in such abundance. The sun always shines except when the government decrees that it shouldn't. Utter madness.

Any comments to andrew@thealcudiaguide.com please.

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