Solar math

In my quest to keep up with the alleged solar market I came across this article from the Salem News. As the article touts in the headline the "Solar farm could power nearly 500 homes" . How near to 500 we don't know but this seems like a rather big deal for a relatively small community. Of course the solar farm isn't really going to provide energy for 500 specific individual homes but rather it will be fed into the grid to be bought by the town;

“We do have a good-sized market that’s on this branch of the New England power grid,” he said. “Any city or town is eligible, but, of course, we hope it’s Beverly because they’re right here.”

So it will produce the electricity equivalent to nearly 500 homes. oOf course there are financial benefits to being solar:

He said selling to municipalities is the most cost-effective because solar producers receive a “significant” discount on transmission costs if they are selling to cities and towns.

I am not sure of the laws and regulations in Massachusetts but based on the statement it seems that this "significant discount" is something provided as some sort of government subsidy to solar producers as opposed to your run of the mill electric producers. This is not what caught my attention however, what attracted me to the story was the math of this project.

As the story points out, this is a private business, not a government run utility or enterprise and so one would assume that the purpose of the project is to make a profit for the people behind the project and this was what triggered my entrepreneurial instincts. How, I wondered, are they going to make money off of this? The first thing I noticed was that the "solar farm" was going to take up eight acres of what one would assume is not exactly dessert wasteland being located in a New England town just north of Boston near the Atlantic coast . There are generally a lot of things you can do or develop on eight acres of land so the fact that they are building a solar farm on this particular plot seems to indicate that they are expecting a good return on their investment. How much of an investment?

Bialek estimated the cost of the project at $6 million.

Six million dollars is still a good chunk of change, but we are talking about what amounts to a power plant here, so how much is that really. Well if you just take what we know, power for 500 homes for six million dollars is $12,000. per home.

That seemed like a lot of money to me, but what do I know. So I wondered how long it would take them to be paid back on their six million dollar investment.  Just across the river in Peabody, it seems the average electric rates for a household are pretty low, actually very low sixty bucks a month low.  Since I could not find exactly how much electric rates were in the adjoining community of Beverly I looked to see what the state average was. As of May 2012 the average household in Massachusetts paid $112 a month for electricity. This seemed reasonable, so let's go with it.

At  $112 a month five hundred homes would pay $672,000 a year towards repaying that six million investment. So it would take just shy of nine years to pay for the initial investment. That doesn't seem to be what the owner calls "a good plan" to me. After all it is not like this solar farm once built is just going to operate without any maintenance, upkeep or repairs, not to mention administrative costs. There is also the issue of interest on loans and a slew of other overhead considerations. So that nine years would certainly be much longer. But it can't be too long, after all the life expectancy on solar panels is somewhere between 20 and 40
years.

No matter how you look at it, the math for a profitable enterprise just does not work out...well not until you get to the bottom of the article.

Bialek said he would apply for federal tax credits and state energy credits that are available for solar projects.

Now we see how an enterprise that makes no sense from a business standpoint works out just fine using solar math

Or a total eclipse of the sun...

It Looks Like Europe Is Going Off The Solar Energy Demand 

Cliff

The Solar Market

Boon or boondoggle? Mounting costs of Louisiana solar power tax breaks could spur changes

The Solar Market ?

Solar firm that got $26M in Miss. loans is closing

JACKSON, Miss. (AP) - Mississippi taxpayers may have only an empty Senatobia building and some solar panel equipment to show for nearly $26 million in loans provided to Twin Creeks Technologies.

The California-based solar technology firm is liquidating, and a company that bought Twin Creeks' assets does not intend to take over its agreement with Mississippi. The contract called for Twin Creeks to invest at least $132 million and create at least 500 jobs.

The Mississippi Development Authority's Kathy Gelston says officials are negotiating for Twin Creeks to repay aid above the value of the building and equipment.

Lenders sold Twin Creeks' technology for $10 million to GT Advanced Technologies of Nashua, N.H., in mid-November. Gelston says Twin Creeks received about $3 million from the sale, but says there are creditors beyond Mississippi.

The world of unintended consequences

Solar power plants burden the counties that host them

Eager for jobs and tax money, Mojave Desert counties welcomed big solar projects. But they may have been too optimistic. And expanding emergency services and infrastructure isn't cheap.

The Solar Market?

FROM-Renewable Biz

Dim solar energy market leads to local job cuts in Springettsbury Township

Oct 17 - McClatchy-Tribune Regional News - Sean Adkins York Daily Record, Pa.

A downturn in the global solar energy market has forced one local company to cut back on its workforce.
Earlier this month, Komax Solar Inc. in Springettsbury Township let go of 33 production, management and engineering workers, said Brian Micciche, president of the company.

Left with a staff of 60, Komax Solar makes machines that are used to make solar energy panels.

"The cutback was in response to the relatively flat production of solar panels," Micciche said. "Since there is an over supply of panel production right now, panel producers are not expanding and are not buying as many machines. This phenomenon is affecting all equipment companies."

For the past several years, many solar energy companies have ramped up production to keep up with demand.

However, as demand has slowed, so has the need for equipment, such as solar panels.

"The panel producers have more than they need," Micciche said.

As a result, the cost for panels have fallen, he said.

Why has the demand for solar energy become flat?

In Pennsylvania, a drained rebate program has contributed to slower sales.

In 2004, the state started to require that, once a utility's rate cap expired, it had to buy a certain amount of solar energy credits each year, said Ron Celentano, a solar energy consultant.

Celentano is president of the Pennsylvania Solar Energy Industries Association.

Basically, a resident or a business with a solar energy system would sell their credits to an aggregator who, in turn, would eventually sell the credits to a utility.

That utility would meet its requirement from the state and the person or business would receive a check.

To make solar energy even more attractive, the state introduced a rebate program with a $100 million budget, Celentano said.

"Solar installers were just packed with jobs and equipment," he said. "Demand was strong."

Now, with nearly all that money accounted for in projects and other expenses, solar installations have slowed, Celentano said.

In addition, as more people and business turned to solar, utilities had little trouble meeting their renewable energy requirements.

"The oversupply of systems contributed to the drop in value of those credits," Celentano said.

Going forward, the number of panel manufacturers is expected to drop, as well as the overall cost for solar energy systems, Micciche said.

For now, Komax will focus on new product development.

"So, when the market does come back, we will have the products it needs," Micciche said.

Solar Markets?

U.S. lawmakers press DOE about Abound Solar tech problems

WASHINGTON Oct 10 (Reuters) - U.S. Republican lawmakers on Wednesday pressed the Obama administration for more information about its decision to back, and then stop funding, a now-bankrupt solar company, with a report now saying the company may have been selling a faulty product.

The request from leaders of the Republican-led House Energy and Commerce committee marked the latest probe of the administration's energy loan program, which has become a lightning rod for critics after the high profile failure of solar panel maker Solyndra.

Abound Solar, another solar manufacturer in the program, filed for bankruptcy in July after receiving about $70 million of its $400 million loan guaranteed by the government.

At the time Abound cited intense competition from Chinese panel makers as the reason for the company's collapse, but a report from The Daily Caller website said internal documents show Abound's panels were defective.

"Recent reports and publicly available documents indicate that persistent technological problems contributed to Abound's inability to remain commercially viable and, ultimately, its bankruptcy," said Republican Congressmen Fred Upton, Energy and Commerce committee chairman, Cliff Stearns and Cory Gardner in a letter to Energy Secretary Steven Chu.

The Daily Caller report said the panels were underperforming and prone to catch fire. The website was founded by Tucker Carlson, a conservative commentator, and Neil Patel, who was an adviser to former Vice President Dick Cheney.

In their letter, the lawmakers questioned what the Energy Department knew about these technological problems before awarding Abound's loan and whether these issues played any role in the department's decision to cut off funding for the project in August 2011.

Prior to finalizing the loan for Abound, a department-commissioned engineering report found "performance shortfalls" with the company's panels, the lawmakers said.So far, the funding received by the three bankrupt companies - including Beacon Power, an energy storage company - in the loan program represents less than 4 percent of the $16 billion in loans the program backed.

The Energy Department has defended its investment in Abound Solar, saying the company was an "innovative" manufacturer that suffered from the precipitous drop in solar panel costs.

An Energy Department official said the administration has already provided Congress with more than 1 million pages of documents as part of Republicans' extensive review of the loan program, including the independent engineering and market analyses used to evaluate Abound.

The Solar Market?

ANALYST: Solar Power Will Never Work For The Vast Majority Of The World

AllianceBernstein analysts Catherine Wood and Brett Winton believe the day when solar power can achieve grid parity, or be cost competitive without subsidies, may never arrive.

Read more here

The Solar Market ?

FROM- The NYT

Glut of Solar Panels Poses a New Threat to China

BEIJING — China in recent years established global dominance in renewable energy, its solar panel and wind turbine factories forcing many foreign rivals out of business and its policy makers hailed by environmentalists around the world as visionaries.

But now China’s strategy is in disarray. Though worldwide demand for solar panels and wind turbines has grown rapidly over the last five years, China’s manufacturing capacity has soared even faster, creating enormous oversupply and a ferocious price war.

The result is a looming financial disaster, not only for manufacturers but for state-owned banks that financed factories with approximately $18 billion in low-rate loans and for municipal and provincial governments that provided loan guarantees and sold manufacturers valuable land at deeply discounted prices.

China’s biggest solar panel makers are suffering losses of up to $1 for every $3 of sales this year, as panel prices have fallen by three-fourths since 2008. Even though the cost of solar power has fallen, it still remains triple the price of coal-generated power in China, requiring substantial subsidies through a tax imposed on industrial users of electricity to cover the higher cost of renewable energy.

The outcome has left even the architects of China’s renewable energy strategy feeling frustrated and eager to see many businesses shut down, so the most efficient companies may be salvageable financially.

In the solar panel sector, “If one-third of them survive, that’s good, and two-thirds of them die, but we don’t know how that happens,” said Li Junfeng, a longtime director general for energy and climate policy at the National Development and Reform Commission, the country’s top economic planning agency.

readentire article here

The Solar Market?

FROM-Gigaom

Sep 30, 2012 - 6:49AM PT

China’s Hanergy to buy solar startup Miasole in fire sale

(excerpts)

...MiaSole was desperate for a white knight to rescue it from oblivion. After years of research and development, the company seemed to have finally nailed its manufacturing process to making solar panels out of copper, indium gallium and selenium (CIGS) that are more efficient than many rivaling CIGS thin film companies. But it was running out of money and needed to expand its production and attract customers. CEO John Carrington joined MiaSole late last year, and he made a public appeal in December for investors and partners who could bring money and sales and marketing expertise....

...Solar startups have been picked off one by one cheaply – or filed for bankruptcy – over the past 19 months because the global solar market has been plagued by a glut of solar panels. The fast-falling panel prices – roughly 50 percent in 2011 alone and 30 percent so far this year – have put an enormous pressure on companies to lower their prices. That pressure is particularly difficult to handle for startups, which often have higher manufacturing costs initially when they are scaling up production of their technology. And many of them indeed were trying to raise more money and make that leap to mass production when the financial market crisis hit in late 2008, followed by the oversupply of solar panels starting in 2011....

The Solar Market?

FROM-New Jersey Star Ledger

Solar panels come to Union County, but program's future not so bright

(Excerpt)

...But instability in New Jersey’s market for solar energy credits, known as SRECs, has raised concerns about the program’s potential to be expanded in the future. And it also calls into question the revenue streams of a private company, California-based Tioga Energy, which owns the solar panels and is obligated to pay back $15 million in debt that Union County guaranteed.

It’s one of many public-backed solar energy initiatives undertaken in New Jersey in recent years, and the uncertainty that surrounds it is an example of what’s being experienced around the state in other parts of the nation. 

The SREC credits, essentially a subsidy, are awarded to homeowners, businesses and utilities that generate energy with solar panels. Prices are set on a market in which utilities buy credits to meet state-mandated quotas. 

For the first few years of the SREC market, solar panel owners got $600 or more for each SREC they earned by generating 1,000 kilowatts of solar energy, equal to about two thirds of the monthly electricity needs of the average New Jersey household. 

Then, once supply of SRECs exceeded what the state told utilities to procure, prices plummeted to the mid-$100 range on spot markets.
That was bad for anyone who relied on high SREC values to pay off solar panel financing, like Tioga, and bad for solar builders if it brings new projects to a screeching halt. 

To save jobs, the state Legislature sharply increased the utilities’ demand for credits over a three-year period, and Gov. Chris Christie signed the bill into law in July. 

So far, though, it hasn’t worked: Prices on the spot market dropped from the mid-$100s to $60 or $70 as of last week, according to the SREC trading company Flett Exchange. 

In the case of the Union County program, Tioga will generate the majority of its revenue by selling electricity to the agencies that allowed it to install the solar panels. But it will also sell SRECs to generate income, and the low prices are bad for its bottom line. 

"We’re going to have to dig in to our own coffers to make the bond repayments," said Marc Roper, the company’s vice president of sales and marketing....

Obama's Solar Nightmare

FROM-American Thinker

By Ed Lasky

The Democrats have been busy the last two years, and not just reengineering the healthcare industry, restructuring the auto sector, assaulting Wall Street and the financial sector, harming our public finances.  They have also been trying to transform America's energy industry at our expense. This is Barack Obama at his worst -- picking losers and winners by personal whim, donations for dollars deals, and ideological zeal.

Who have been the losers and who have been the winners?  And have the winners just been taking the taxpayers for a ride while their guy has been driving the bus -- with taxpayers sitting in the back?

The Obama administration has tried to kill off the oil industry. Offshore moratoriums have been unilaterally imposed by executive orders and justified using scientific panel studies that were misrepresented-if not distorted- by the administration. The drilling permitting process has been afflicted with sclerosis. Federal lands are becoming less and less available for development.

Obama does not like carbon; he boasted during the campaign that he would bankrupt coal power plants and that his policies would necessarily boost the price of power. Those words were ignored by much of the media, in thrall to the man they so wanted to win. When the rapture swept journalists into ecstasy who cared about little details here and there about Obama's agenda?

He tried and failed to get a cap and trade bill through Congress. He warned that if that effort failed he would do another end run around Congress and rely on his Environmental  Protection Agency to do his dirty work.

Who knows? Maybe Obama has personalized his gripes and made them the basis of public policy. We know how he feels about George Bush and Dick Cheney -- both with strong ties to the oil industry. Maybe he just doesn't care for the South where much of our carbon wealth is found -- a Republican redoubt that he may have just written off as a political wasteland for him.

Hence, gas prices approaching $4 dollars a gallon -- and this is not yet the summer driving season that typically boosts gas prices as demand increases.

This price hike may make New York Times columnist Tom Friedman gleeful. He considers high priced gas (and Chinese authoritarianism) the answer to all ills. He writes column after column on these topics from the baronial splendor of his homes (here is a photo of one of them; he earned his fortune, by the way, by marrying it). Undoubtedly, he salves his conscience regarding the carbon footprints of his homes with checks to buy carbon credits -- and writes more columns castigating us for our addiction to carbon.

But I digress.

How else have the Democrats been trying to change our power industry? By the old-fashioned way: changing the rules of the game (as noted above) and then using our tax dollars to enrich green schemers. The grand champion of spending boosts by Barack Obama and the Democratic Congress has been a 1014% boost in spending for the "Energy Efficiency and Renewable Energy Program."  Then there is something called the Green Jobs Labor Fund-which did not even exist prior to 2009 and has received hundreds of millions of dollars.

But wait...there is more.

HEADLINERS

Headlines that caught my eye

From- eWire Informer

Evergreen Solar Cutting Jobs And Moving To China

Alternative Energy and the Academy at Lagado

FROM-American Spectator


By Iain Murray

A lot of otherwise sensible people have been calling recently for massive government investment in alternative energy research, arguing that it is the only solution to the risk of global warming that doesn't involve economic ruin. I can see their point and have often considered it myself. Then I remember Gulliver's Travels. Jonathan Swift's classic work is not a simple fairy tale, as so many children's adaptations have made it seem, but a biting satire that tells us that certain popular conceits are not new, and we should be wary of falling for them again.

The most relevant passage is in Part III, when Gulliver visits the Academy of Lagado. The Academy is DARPA in all but name, a brain trust where those with great ideas can work on those ideas at will, free from the corrupting demands of the marketplace. The first academic Gulliver meets is working on a new source of energy:

The first man I saw was of a meagre aspect…He has been eight years upon a project for extracting sunbeams out of cucumbers, which were to be put in phials hermetically sealed, and let out to warm the air in raw inclement summers. He told me, he did not doubt, that, in eight years more, he should be able to supply the governor's gardens with sunshine, at a reasonable rate: but he complained that his stock was low, and entreated me "to give him something as an encouragement to ingenuity, especially since this had been a very dear season for cucumbers."

Yes, Gulliver met a solar power researcher. How does this speak to us today? Consider that in Germany, the world leader in solar power, photovoltaic solar panels supply 0.6 percent of the country's energy, but the total cost to the country's economy for those modules, which have been installed in the past decade, is likely to reach almost $75 billion. It is always a very dear season for solar power.

Others at the Academy are pursuing equally noble research projects. One, for instance, is trying to figure out how to turn excrement back into food. Another is teaching boys how to write treatises on politics using words generated randomly from a machine.

Yet it is the Academy's mission and the attitude of Lagado's citizens to it that speaks most closely to proposals for massive government investment in alternative energy:

In these colleges the professors contrive new rules and methods of agriculture and building, and new instruments, and tools for all trades and manufactures; whereby, as they undertake, one man shall do the work of ten; a palace may be built in a week, of materials so durable as to last for ever without repairing. All the fruits of the earth shall come to maturity at whatever season we think fit to choose, and increase a hundred fold more than they do at present; with innumerable other happy proposals. The only inconvenience is, that none of these projects are yet brought to perfection; and in the mean time, the whole country lies miserably waste, the houses in ruins, and the people without food or clothes. By all which, instead of being discouraged, they are fifty times more violently bent upon prosecuting their schemes, driven equally on by hope and despair.

As Swift so ably reminds us, innovation for its own sake comes at a cost, particularly when it is preceded by rejection of the old. Would that the Obama administration had kept that in mind before imposing stricter automobile fuel economy standards without any real idea of how to reach them!

The irony is that Lagado was once a happy and prosperous place, but fifty years before Gulliver's arrival, some citizens went abroad and, on gaining a smattering of learning elsewhere, "began to dislike the management of every thing below, and fell into schemes of putting all arts, sciences, languages, and mechanics, upon a new foot." Gulliver's host had not fallen for the new fashion. Instead, he continued to live in an estate run along the old lines. The price he paid was also dear:

[S]ome few other persons of quality and gentry had done the same, but were looked on with an eye of contempt and ill-will, as enemies to art, ignorant, and ill common-wealth's men, preferring their own ease and sloth before the general improvement of their country.

Apparently, Swift even anticipated the price of being a global warming skeptic.

Graph of the Day

FROM-SF Chronicle

Not a market- a cause

Consider these two stories and how the global warming hysteria has so terribly maligned the market system. The first from Silicone Valley/San Jose Business Journal

Report: Lights out next year for many in solar industry

Massive inventory buildup and Chinese competition could put half of all solar manufacturers out of business next year, according to a market research firm.

The report from The Information Network said inventory is averaging 122 days in 2009 versus 71 days in 2008.

Further, it reports that production has dropped to 27.9 percent of potential capacity in 2009 from 48 percent in 2008.

"As many as 50 percent of the more than 200 solar manufacturers, mired in red ink with current selling prices above $2 per watt, may not survive," the report said. Making matters worse, lower cost products from China are projected to drop to below $1 per watt in 2010 and 50 cents in 2011.

A number of solar panel manufacturers have reported losses in recent weeks including Energy Conversion Devices Inc., JA Solar, LDK Solar Co., Q-Cells, ReneSola Ltd., Solar Power Inc., and Yingli Green Energy Holding Co. Ltd.
************
Now any reasonable person would read that and surmise that the solar power panel business was not a good investment at this time. The market, for the reasons explained , is way down and inventories are up. But solar power is not a market, it is a cause. from Silicone Valley Mercury News :

With $535M federal loan, Solyndra begins work on Fremont solar-panel plant

Solyndra, a privately held Fremont company, is using a $535 million loan from the U.S. Treasury to build its second solar-panel factory.

Solyndra celebrated the boost for solar power with star power: an event with Gov. Arnold Schwarzenegger and U.S. Energy Secretary Steven Chu — and, via satellite from the White House, Vice President Joe Biden.

"We have adopted policies in California that have driven demand for solar and other renewable technologies, and our businesses and entrepreneurs are rising to the challenge," Schwarzenegger said, according to a statement from his office.

Construction on the fabrication plant, or "fab," began today next to the company's first factory in Fremont, Solyndra said in a statement. The new fab is designed to produce enough rooftop photovoltaic solar panels to generate 500 megawatts of power a year.

"The economy needs clean-tech alternatives to help it recover, but our planet requires clean-tech solutions in order to survive," Solyndra CEO Chris Gronet said in a statement.

The second factory "will allow us to meet customer demand while making a positive impact on the world's energy and environmental needs," Gronet said.

Solyndra said it was the first company to secure a loan backed by the U.S. Department of Energy under a 2005 law to encourage the production of renewable energy. The $535 million loan was combined with $198 million in funding led by Argonaut Private Equity, Solyndra said.

The company said about 1,000 people will work at the plant once construction is done.

*******************

The disconnect here seems to be obvious. Not only is taxpayers money being used to subsidize an industry that can not be self supporting, it is subsidizing an industry that is "mired in red ink" and "may not survive". Even the potential "stimulus" generated by the subsidy is not warranted if as the first story makes clear there is no market for what they are subsidizing, thus no jobs.

Everything about the second story is a sham, from the Governator " "We have adopted policies in California that have driven demand for solar and other renewable technologies, and our businesses and entrepreneurs are rising to the challenge,"

If that is the case why is there such a glut of product and more importantly why do the businesses and entrepreneurs need subsidies? If you have created a market then the businesses ought to be able to support themselves-huh?

Then we have this from one of those alleged entrepreneurs:

The second factory "will allow us to meet customer demand while making a
positive impact on the world's energy and environmental needs," Gronet said.

Well if you have such demand why do you need The Governator and Nobel Laureate Chu to write you checks to meet it? Just another casualty in the global warming mirage-the market system.

More...

Makes Sense

This is they type of alternative energy projects that make sense, with a rational approach towards conversion to "renewable energy". Also a common sense approach to the reporting of the subject.


FROM-Denver Green Business Examiner-Michael Crist

Xcel to augment coal with solar


Xcel Energy's Cameo power plant is scheduled to become the first coal fired power plant to be linked to solar energy production. This $4.5 million pilot project is a partnership between Xcel Energy and Abengoa Solar. It will study how effective a field of parabolic mirrors can be as a means to reduce coal consumption and the feasibility of electricity generation to move in and out between solar production and coal generation without negatively affecting overall production and performance.

The 4 megawatt array of mirrors will focus the sun's rays on a central collection unit that will preheat water to be turned into steam to power electricity generating turbines. It is hoped this solar ability will reduce some 900 tons of coal consumption at the plant which burns approximately 230,000 tons per year.

Abengoa Solar is one of the world's leading solar technology development companies. They currently are in the planning stages of a 280 megawatt array in Arizona which would be the world's largest solar power plant. They have U.S. offices in Lakewood and San Francisco. Their current projects include the Jefferson County Detention Facility, the California Correctional Institution at Tehachapi, Cochise College in Douglas, Arizona, Ft. Sam Huston in Texas and the Frito Lay plant in Modesto, California.

If this pilot proves successful it will pave the way for a marriage between coal and solar which will be beneficial to both technologies. The transition to alternative energy technologies will take time, we cannot simply flip a switch, and we will need a mixture of energy production sources into the foreseeable future. Certainly the growth of solar and wind production will help to augment more traditional means of production, reducing the strain of demand on those means, while continuing the growth curve for these developing technologies.
More...

"You don't say ?"

"...drastic changes in policy can really kill a market,"

FROM-NYT

Spain's Solar Market Crash Offers a Cautionary Tale About Feed-In Tariffs

For a brief, shining moment, Spain was the best solar market in the world

Unlike in cloudy Germany, the sun bakes Spain's southwestern provinces -- the brown, hard-packed Extremadura and Andalusía -- on the Mediterranean coast. And the Spanish government, eager to fulfill its commitments to renewable energy, guaranteed generous subsidies for any company that met its aggressive deadlines.

While the ministry expected a steady stream of investment, it got a flood, accounting for more than 40 percent of the world's total solar installations last year. Forced to revise the subsidies -- known as feed-in tariffs -- that it used to spur photovoltaic power last fall, Spain became one of the principal causes of the downturn in the solar industry. And its faulty regulations have become a watchword for how government renewable-energy programs, poorly conceived, can go awry.

"[The crash] was an inevitable consequence of a policy that was not ... a long-term sustainable market design," said Julie Blunden, vice president of public policy at U.S.-based SunPower Corp. "Whenever you've got something that's unsustainable, eventually it gives. And lo and behold, that happened."

Many in Europe and some in the United States view feed-in tariffs, which guarantee elevated electrical rates to qualified projects, as the best way to spur immediate development of renewable markets. The long-term stability provided by the subsidies lures capital, and the sliding scale of the tariff's prices, which typically drop each year toward average rates, encourages early adopters.

There are many success stories: Germany's program has become the model, with fellow E.U. countries France, Italy and the Czech Republic adopting similar schemes. In the United States, California began a small-scale feed-in system last year to great success, and states like Vermont and Washington have added similar programs this year.

Such programs would do well to learn from Spain's mistakes, solar executives and analysts say. In just one year of boom, the country committed itself to solar payments estimated at $26.4 billion, which in turn led to taxpayer backlash and bust.

"Spain is a perfect example of how drastic changes in policy can really kill a market," said Reese Tisdale, solar research director at Emerging Energy Research, "the caveat being the world economy tanked on us at the same time."

"What's important for the regulation of solar is stability," said Santiago Seage, the CEO of Abengoa Solar SA, one of Spain's largest solar developers. "Unfortunately, up to now, we have had too many changes. ... [And] if the context changes, you can make mistakes in business decisions."

The feed-in tariff established by Spain in 2007 guaranteed fixed electricity rates of up to 44 euro cents per kilowatt-hour to all new solar panel projects plugged into the electrical grid by September 2008. Also, a loophole in the tariff allowed bundles of small, ground-based projects to receive up to 575 percent of the average electricity price.

Given the country's abundant sunshine and such a beneficial tariff, the market was bound to overheat, Tisdale said.

"If [the tariff] is too high, then everyone is going to go to that market," he said. "That's just how it is."

What went wrongMore...

The photovoltaic market has been cutting its costs rapidly, and the Spanish tariff, with its high rates, created an artificial market, developers said. And unlike Germany, Spain had no system built in to reduce tariff rates if its capacity targets were exceeded. Indeed, there were no stepped reductions, or degressions, at all. There was no ability to react.

"The most important lesson, which everyone has learned, is that if you're going to establish a feed-in tariff, you need to figure out how to make it market-responsive," Blunden said.

While the government had expected it would not see 400 megawatts of solar capacity in the country until 2010, by the fall of 2007, some 350 megawatts had already been installed. Chinese solar firms were sending container after container, flush with solar panels, to the country.

Scrambling, the government upped its target to 1,200 megawatts. But as it became clear the market would overshoot that limit, too, the boom became a frenzy as developers rushed to connect their projects to the grid before last September, when the government altered the tariff, dropping rates by 30 percent.

Many businesses feel burned by the boom and bust engendered by the tariff.

"If the Spanish government is going to pull the rug out from under them, that's kind of a problem," Tisdale said. "There will be a rush to get projects in the ground. They know in a mid-August night the government could pull the rug out from under them."

Many companies faced accusations of fraud, based on claims that they had connected to the grid by the government's deadline of Sept. 29. Spain's National Energy Commission is currently investigating several projects, according to ASIF, Spain's photovoltaic association. Still, even with this fraud, some 3 gigawatts of solar capacity were installed in Spain within 18 months.

Fallout

The repercussions of the tariff revision can still be seen today. The photovoltaic market was overwhelmed with excess panels, reducing prices. Demand from feed-in systems begun by Italy and France helped, but did not soak up all the excess supply. Spain's solar industry lost more than 20,000 jobs.

The downturn hit many manufacturers hard, like Germany's Q-Cells, which announced the layoff of 500 employees yesterday (Greenwire, Aug. 17). Prices for solar panels are at about half what they were last year, selling for about $2.40 a watt.

In the end, Spain was an accidental innovator, Blunden said. The government had hoped its tariff would spur construction of rooftop solar panels. Instead, it jump-started the ground-based solar industry.

"Spain demonstrated to the world how fast to market [solar] can be," Blunden said.

Americans and others would be wrong to avoid the feed-in tariff based solely on Spain's experience, Abengoa's Seage said.

"The feed-in tariff is a mechanism that, typically, Americans don't like," Seage said. "They believe it doesn't optimize costs for the taxpayers. ... Nevertheless, I feel it has a huge advantage. It's a simple mechanism to get the market started."

After the market is started, then you can fine-tune your numbers, Seage added.

The solar photovoltaic companies still operating in Spain have found themselves in a new business, said Eduardo Collado, ASIF's technical manager.

"The photovoltaic model has changed from large, ground-based installations to roof installations," he said. "The latter generate close to places of consumption. It is more distributed and close to consumers."

The government's revised tariff has set a hard cap of 500 megawatts to be built, most of this as more costly rooftop installations. Revisions to the tariff are made on a quarterly basis. Demand remains high, however, with 2,468 applications having been received recently, according to the Ministry of Industry, Tourism and Trade.

Spain will remain a viable solar market, most in the industry agree. But the whole process could have been much less painful with a bit more foresight.

In the end, Blunden said, it is a simple truth: "If you're not careful in your market design, you basically run out of money."