article in the New York Times about the collapse of the Spanish solar market. He calls the article "smart," but it ain't.
I discussed the real reason for the collapse of the solar market recently at Grist, but I suppose nobody read it; at any rate, neither Brad nor Elisabeth Rosenthal (the author at the New York Times) seems to know the real story. Basically, under FITs utility companies pay renewable power generators and pass the costs on to all ratepayers. There is no tax money involved.
The problem was that Spain wasn't doing this. Spanish law used to stipulate that retail electricity rates would be set by the government for the coming year, and if there was a shortfall, the government would raise the rates for the subsequent year and reimburse the utilities out of their budget. In this case, the cost of solar apparently caught the government unawares, and a lot of money was going to have to be passed on to taxpayers, which is not part of successful FIT design. But Plumer and Rosenthal don't mention that all. Indeed, they both seem to suggest that tax money is always involved.
As in all countries, the Spanish government decided not to raise taxes to cover the budget shortfall, but simply pass on the debt to future generations. It was therefore decided to toss the system out - not just FITs for solar, but the whole setting of retail rates for the year. See my article at Grist for more. In the meantime, FITs for wind etc. remain in place.
Plumer can be praised for pointing out that the Spanish problem was unique:
What's odd is that this could have all been fairly easily avoided. Germany also has feed-in tariffs for solar power, and hasn't seen the same frenzied boom and bust...
But neither Plumer nor Rosenthal point out that FITs are not the problem; only solar has had this problem. The FITs for wind, etc. are still doing fine.
The article in the New York Times also has some unfounded claims, such as "as low-quality, poorly designed solar plants sprang up on Spain’s plateaus, Spanish officials came to realize that they would have to subsidize many of them indefinitely" -- has anyone heard of such a
thing? I haven't. Interestingly, the article contradicts itself later when she writes, "Even inefficient, poorly designed plants could make a profit." OK, Elizabeth, which one is it?
And Brad, did you not notice that contradiction when you called the article "smart"?
Also, the definition of feed-in tariffs at the New York Times is off the mark:
Europe has generally relied on so-called feed-in tariffs, through which governments pay a hefty premium for electricity from renewable resourcesActually, governments don't pay the premium at all; see my description above. And the only one that is "hefty" is the one for solar.
Incidentally, Elizabeth Rosenthal is also the person who wrote two misleading articles about Freiburg, which I commented on here and here.
This story comes to mind.
ReplyDeletehttp://www.greentechmedia.com/articles/read/solar-fraud-could-eliminate-spanish-market-5380/
An interesting story, but is that really the same thing as she describes?
ReplyDeleteI really don't see the "contradiction" here, Craig. She's saying that there were poorly designed plants that cost more to operate than well designed plants, but that the FITs were so high that they could still make a profit. Reduce the size of the FIT and they lose money.
ReplyDeleteIf Brian creates a plant that can provide X amount of power for $25, while Craig creates a plant that can provide X amount of power for $10 and the FIT is $50, we both profit handsomely. If the FIT then drops to $20, you are still making a hefty profit, while I am losing money. No contradiction at all.
BrainE writes: "She's saying that there were poorly designed plants that cost more to operate than well designed plants, but that the FITs were so high that they could still make a profit. Reduce the size of the FIT and they lose money."
ReplyDeleteThat's not what she says. This is what she says:
"as low-quality, poorly designed solar plants sprang up on Spain’s plateaus, Spanish officials came to realize that they would have to subsidize many of them indefinitely"
FITs, even in Spain, are designed for some 20-25 years, not indefinitely. If they need indefinite support, it does not follow that:
"Even inefficient, poorly designed plants could make a profit."
Under properly designed FITs, inefficient, poorly designed plants are not profitable. You need upfront installation bonuses (common in the US) if you want to promote inefficient, poorly designed systems.
Craig - you're just working yourself up over semantics.
ReplyDelete"Under properly designed FITs, inefficient, poorly designed plants are not profitable."
The whole point of the article was that the FITs in question were NOT properly designed. You seem to be operating under an assumption that the term "FIT" can only be applied to your definition of a "properly designed FIT". I think it's important to understand that governments can make mistakes - creating FITs that are either too generous (keeping them on the hook for poorly designed plants or letting them go under when the FIT is reduced) or not generous enough (providing no incentive to begin the build-out that will provide economies of scale and the lowering or elimination of new FITs).
An objective reader of the article would come away with "don't overpay on FITs", not "solar is inherently unprofitable." She specifically states that Italy will probably start installing solar with no need for FITs at all, as the cost of solar is already competitive with existing Italian rates.
"She specifically states that Italy will probably start installing solar with no need for FITs at all, as the cost of solar is already competitive with existing Italian rates."
ReplyDelete1) Italy already has feed-in rates for solar.
2) Italy will need to keep FITs for solar to prevent overpayment after "grid parity."