By Gianluca Baratti
May 8 (Bloomberg) -- Spain has turned itself into the world’s biggest builder of solar-energy plants, attracting developers from the U.S. and France by guaranteeing prices that weigh down Spanish consumers.
The government promotes clean fuels by letting generators charge as much as 10 times more for power from the sun or wind than from burning coal. The premium, added to bills of homes and businesses, has spawned a solar-investment boom by utilities, from Florida’s FPL Group Inc. to Electricite de France SA.
As a result, developers now plan enough solar thermal projects to generate the power of nine new atomic reactors, or 14,000 megawatts if all get built, Spain’s industry ministry said. That’s the biggest project pipeline, beating sun-blessed Australia and the U.S., where Congress increased aid this year for alternative energy, an Emerging Energy Research study said.
“Who wouldn’t want to enter a business that’s paid many times more than the market rate, and where the customer is guaranteed for life?” said Gabriel Calzada, an economist and professor at Rey Juan Carlos University in Madrid.
Spanish law forces distributors to buy all clean energy produced in the first 25 years of a plant’s life and resell it to consumers. With little oil and lots of sun, Spain is betting the sacrifice will pay off as fossil fuels get more expensive and need costly emission permits under global-warming treaties.
Forty-two percent of power bills, or 95 euros ($127) for every Spaniard, will cover subsidized clean energy in 2009, the ministry estimates.
‘Heavy Price’
“We’re all paying a heavy price for green power,” said Calzada, an opponent of subsidies.
The government raised rates in May 2007 for solar thermal plants, which concentrate sunlight to make steam for power generation. They now earn about 300 euros a megawatt-hour, seven times the average rate coal- or natural gas-fired plants got this year.
A megawatt-hour supplies about 1,500 Spanish homes for an hour, or about half as many homes in the U.S.
“The guarantee is more attractive than what other countries offer,” said Karsten von Blumenthal, an industrial analyst at Hamburg-based SES Research GmbH. “Actually the U.S. has better space for solar, in the deserts of California and Nevada.” Still, the combination of U.S. tax credits and grants are a lesser incentive for developers, he said.
Florida to Spain
Spain’s solar deal was interesting enough for Juno Beach, Florida-based FPL to cross the Atlantic and propose two 50- megawatt solar thermal plants. EDF, France’s biggest power company, raised its stake last year to 90 percent in Fotosolar, a Spanish photovoltaic developer. FPL, the largest U.S. producer of wind power, wouldn’t say which subsidy system it preferred.
“I would not define Spain as more or less attractive, rather it is a new opportunity,” Steven Stengel, a spokesman for FPL unit NextEra Energy Resources LLC, said in an e-mailed response. FPL plans two U.S. plants totaling 325 megawatts.
Neither country gets more than 1 percent of power yet from solar thermal or photovoltaic plants, which use a technology that turns sunlight directly into electricity. Spain installed the most of both technologies last year, trade group data shows.
The two nations lead the world in solar thermal projects coming online by 2011, according to Cambridge, Massachusetts- based Emerging Energy Research. About 1,750 megawatts will be switched on in the U.S. by that year and twice that level in Spain, the research firm said in April.
U.S. Momentum
The U.S. now is regaining momentum lost almost 10 years ago when the government “changed policy, leaving solar technology on the shelf,” said Edward Soler, a business development executive for Spanish builder Abengoa SA. During that decade “Spain underwent a learning curve that was aided by a change in regulations” that improved incentives, he said.
Abengoa, which set up a 20-megawatt solar thermal plant near its Seville, Spain, headquarters, plans one 14 times that size, billed as the world’s biggest, about 60 miles outside of Phoenix to feed local utility Arizona Public Service Co.
In the U.S., where President Barack Obama backed increased incentives this year, 6,000 megawatts of solar thermal projects are under way, said Fred Morse, an official at the Washington- based Solar Energy Industries Association trade group.
Promoters in the U.S. must convince utilities to contract their power, a necessary step for most project financing. Also, they may be reimbursed for 30 percent of the plant’s cost through a tax credit or grant and can apply for federal loan guarantees. They earn no special power rate.
The U.S. can’t catch up until more rules on aid are published, Morse said.
Better Incentives
“The incentives, if implemented promptly and effectively, should greatly facilitate the financing of these plants” in the U.S., said Morse, who prepared the first study on solar energy’s potential as a national resource for the White House in 1969.
In Spain, subsidies already spurred local utility Iberdrola SA of Bilbao and Madrid-based builder Acciona SA to become the world’s largest investors in wind, ahead of FPL and EDP-Energias de Portugal SA of Lisbon, with turbines in more than 20 nations.
Premium prices for solar, wind, biomass and co-generation power will cost Spaniards 4 billion euros in 2009, the National Energy Commission regulator estimates.
Developers also have come for the Mediterranean sun, which has attracted foreign retirees since the 1960s and fueled Europe’s biggest vacation-home market. The sun shines 2,800 hours a year in much of Andalucia. The southern region, home to British vacation favorite Malaga, now harbors solar plants by Abengoa, Acciona and builder Sacyr Vallehermoso SA of Madrid.
Photovoltaic Boom
Acciona and Heliosolar of Navarra, Spain, are among a group of developers that switched to solar thermal after doing photovoltaic projects. In two years, so many photovoltaic plants were rushed online that the Spanish government tightened rules for eligibility. For solar thermal, an unlimited number of licenses will be given out until at least 2011.
Developers bank on Spain continuing to force utilities Endesa SA, Iberdrola and Gas Natural SDG SA to buy all alternative energy produced. On especially windy or sunny days, they must ramp down coal- or natural gas-burning plants.
Acciona was one developer that began investing before its main business, construction, was hurt when the Spanish housing boom went bust in recent years, and as oil prices rose. Acciona has a solar-thermal plant in Nevada and five projects in Spain.
“All the investment in clean energy in the European Union grew from the summer of 2004, when Brent passed $40 a barrel and was giving clear price signals of a tension that wasn’t going to go away,” said Tomas Diaz, spokesman for the Spanish Photovoltaic Industry Association.
20 Billion Euros
Spain’s premium price paid to photovoltaic plants drew in 20 billion euros of investment in those projects in about one year, before the government made the terms less generous in 2008, the trade association’s Diaz said.
“Cash poured in since 2007 as investors fleeing the subprime crisis in the U.S. looked for a safe haven for their money,” Diaz said.
Even the U.S. insurer American International Group Inc., bailed out last year by the Federal Reserve, bought 300 megawatts of solar plants in Spain that it has since sold.
To contact the reporters on this story: Gianluca Baratti in Madrid at gbaratti@bloomberg.netTodd White in Madrid at twhite2@bloomberg.net
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