Finding the Key to Subsidizing Solar Power


Photo via International Rivers

The International Herald Tribune has an interesting (if embarrassingly headlined--in the print edition, they went all-out for an Icarus reference) look at the boom and bust of the Spanish solar industry today. Basically, in a rush to jumpstart a pioneering solar industry, the Spanish gov offered far too sweet a feed-in tariff for solar investors--a whopping 58 US cents per kilowatt hour generated by solar power. Unsurprisingly, the scheme brought investors scrambling to install solar in Spain, and they did so cheaply and in huge numbers: the nation hit its target of generating 400 MW from solar by 2010 three years ago. But. It wasn't sustainable, of course. The government couldn't keep subsidizing solar at such a generous rate--a generous rate that also prevented companies from striving to improve their efficiency and technology. This left far too many companies reliant on the subsidy--even poorly designed solar plants could turn profits--and after it was reigned in last year, many smaller ones collapsed.

However, as the story notes, it's unfortunate that these lessons came at Spain's expense, but the industry will be stronger for them. And they by no means signal a failure on Spain's part--if anything, the experiment has proved more successful than not. Spain's stronger solar companies have streamlined their business models and have improved as a result, while the unsustainable ones have closed up shop.

It's been tough to pinpoint the right figure for incentivizing solar in a way that will help it grow competitively and simply propping it up. Spain's new rate is around 29 cents per kilowatt hour, and Germany is dropping its rate from 39 cents to around 15% less than that.

Improving these subsidies is crucial to the implementation of solar--because with the hardware getting cheaper (thanks China!) and the tech getting better, the day isn't far off when solar will be truly competitive with dirtier energy (Italy's solar industry is projected to be ready to compete on its own as soon as next year, thanks to that nation's abundant sunlight and reliance on imported fossil fuels).

Effective subsidies can help a nation carve out a more robust role in the market for cleantech, as well as bring cleaner energy sources online faster--hint, hint.

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