The approval of Royal Decree 1578/2008 in September of last year has decimated the Spanish solar industry; paralysing the national market and leading to a sharp drop in demand for photovoltaic solar energy. The outcome: Spain ceding its position as world leader to China.

After several years of spectacular growth in Spain’s photovoltaic solar industry, which made it world leader in 2008, China has taken over top slot after increasing its installed capacity by 100% during the first half of 2009.

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Over 2,600 MW of solar power was installed in Spain during 2008, enabling the Mediterranean country to occupy first place in the world solar rankings ahead of Germany and the US. This spectacular year-on-year growth of 385% was fuelled by a generous feed-in tariff for PV solar energy and meant that Spain accounted for 45% of the global PV solar market (which met 1% of total energy demand last year).

Unfortunately, the Spanish government decided that the feed-in tariff established by Royal Decree 661 regulating the production of electricity using renewable energy sources was too generous and was leading to unsustainable levels of growth. As a result, it issued a Royal Decree specific to the PV solar industry (Royal Decree 1578/2008) establishing 20-30% tariff reductions in an attempt to slow the growth of the market. This move has had the desired outcome of slowing growth, although there are clear signs that Spain’s PV solar industry has taken a severe blow that has caused possibly irreparable damage. Just when the Spanish economy needs the kind of leadership the PV solar industry showed last year to bring it out of a severe recession in which unemployment is spiralling upwards, the Royal Decree has caused 25,000 jobs to be lost. According to the Spanish PV Industry Association (Asif), this accounts for 27% of permanent jobs and 90% of temporary jobs in the PV solar sector. Indeed these cuts have been so severe that it has been impossible to install the maximum 500 MW permitted under Royal Decree 1578/2008. Asif also reports that the sector is also stagnating due to the current recession and difficulties in obtaining financing for new PV solar projects.

In China, however, the PV solar industry is flourishing thanks to several measures taken to boost the sector, which is expected to growth from 10 GW to 20 GW by 2020. The Chinese government announced in July that it will offer grants to finance half the cost of constructing solar plants, along with other measures to help small companies to obtain credits from state-owned banks. Several Chinese companies such as Suntech Power Holdings Co. and Yingli Green Energy Co. are increasing solar energy production around the world, while Suntech, for example, is now ranked as one of the leading solar panel producers worldwide.

The US has also taken decisive steps to nurture its solar industry. The US government has established measures such as financial support for installing plants and grants for solar companies which it hopes will enable the sector to recover from the recession and return to one of the top positions in the global solar rankings.

Meanwhile, the PV solar market has also taken a hit in Europe, with countries such as Germany and Norway announcing losses after several years of significant growth.

Nevertheless, Asif is confident that last year’s boom has lead to Spain reaching critical mass and that it can recover its position as leader of the industry, which is among those with the greatest prospects of growth worldwide, in the near future.

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