Review of the Legislative Framework for the Remuneration of Photovoltaic Production in Spain: A Case Study

Abstract

Spain is among the European countries with the greatest photovoltaic potential. During the first decade of the 2000s, Spain was a European leader in installed photovoltaic power and job creation in the renewable energy sector, strongly influenced by a very favorable regulatory framework and public subsidies at a time of economic growth. That situation would be completely reversed with the regulatory changes introduced in 2012 to combat the tariff deficit and the instability in the electricity supply system, problems accentuated by the economic crisis. The main objective of this study is to present an exhaustive review of the legislative changes that have affected photovoltaic energy in Spain. Using real data on electricity production and the remuneration of a typical photovoltaic plant, we show that there was a very significant fall in the economic returns that investors had come to expect, within a system that prioritized, first and foremost, the initial investment rather than the levels of electricity production. The changes to the legislative framework affecting a typical 100 kWp photovoltaic (PV) facility that entered into service before 2007 provoked a significant decrease of 8.7% in expected revenues, calculated from real data of production and income. These economic losses can be even higher, with a drop in revenue of almost 25% if the entire period of the installation’s useful life is analyzed. Public support for renewable energy is important for its introduction into the electricity market, but so is regulatory stability that offers investment security and predictability for maintaining investment and development in the renewable energy sector.

Analyzing Profitability and Discount Rates for Solar PV Plants. A Spanish Case

“…Karasmanaki et al (2019) [12], for instance, explore the factors that influence the desire to invest in renewable energy ventures, but they only take into account demographic aspects and do not consider financial ones such as the cost of capital. Blanco-Diez et al (2020) [5] have recently analyzed how changes in Spanish legislation have impacted remuneration, but only in terms of revenue and without considering profitability, and hence, cost of capital. Pavel Atănăsoae (2020) [13] uses a discount rate of 5% for his financial assessment but does not justify it, similarly to García-Gusano et al (2016) [14], who do not justify the discount rates employed for the financial methodology used in their study either.…”

“…After obtaining the discount rates, we apply them to a case study. In this paper, we examine the profitability of a standard PV installation with 5000 kW peak production and also focus on the changing market conditions set by the Spanish government energy policies, which have been regulated through royal decrees and ministerial orders on PV installations [5]. Specifically, we have analyzed the profitability of PV systems for the following years: [9] promoted the use of REs while also fostering competition in order to reduce investment costs.…”

23 Years of Development of the Solar Power Generation Sector in Spain: A Comprehensive Review of the Period 1998–2020 from a Regulatory Perspective

“…From the 1990s, the national energy policy priority for the different Spanish governments was to support RES given its potential benefits related to environmental protection aligned with the EU policies, heightened awareness within society of the fight against global warming, job creation, diversification of the energy mix and decrease in energy reliance on fossil-fuel imports [8,[22][23][24]. In particular, the Spanish energy system has always been characterized by its high dependence on imports for fossil fuels, i.e., Spain's national production only has covered about one quarter of total energy supply over the last two decades [2,19,21,25].…”

“…As for the 1998-2008 promotion period, Spain implemented a special regime (SR) promotion mechanism for RES, prompting high deployment levels of electricity generation from renewable technologies in that period. Specifically, the Spanish government introduced a feed-in promotion scheme, i.e., feed-in tariff (FIT) and feed-in premium (FIP), which were the most widespread RES promotion mechanism in the EU, and the most significant regarding the amount of support awarded at that time [1,3,8,22,24,29,31,32]. By way of example, almost all the new solar photovoltaic (PV) capacity in the EU was installed by means of FIT schemes during that period [33].…”

Communicating the Values and Benefits of Home Solar Prosumerism

“…Spain has now returned to a leadership position in the global PV market. In 2018, total installed PV capacity in the Spanish energy system was 4714 MW [34]. In 2019, installed PV capacity nearly doubled, reaching 9910 MW and accounting for 6.4% of total electricity demand, just behind EU countries such as Germany (where PV accounts for 9% of total demand), Austria (8.7%) and Italy (7.6%) [35].…”