For the past two years Spanish solar companies working in once-gritty city of Puertollano were soaking up the rays of government subsidies—creating what one paper called a 21st century gold rush. But just as quickly as the rush began, the sun set on the subsidies, leaving the city dotted with low-quality, poorly designed solar plants.
Now it’s the time of reckoning.
Two years ago, the Spanish government provided lucrative subsides to the national solar energy industry, pushing sun-drenched cities on the Spanish plateau like Puertollano to quickly do whatever it took to attract solar companies. Puertollano proved to be incredibly adept at luring solar companies. It even came up with a catchy marketing slogan: “The Sun Moves Us.”
And it worked. The city quickly attracted the investment of two enormous solar power plants, a slew of factories producing solar panels and silicon wafers and a number of clean energy institutes.
The rush helped to create a bonanza among the city’s residents. Farmers cashed in by selling their land for solar plants, while people from around the world moved to the city to cash in on the solar gold rush. For a city that suffered from 20 percent unemployment and a population exodus—the sun was finally shining down.
But government officials soon realized that the shoddy and poorly planned solar plants being built in cities like Puertollano would never be able to survive without the government help and, as a result, the subsidies would go on forever. So in September they decided to pull back the subsidies.
The result: Puertollano’s boom quickly turned to bust. A number of factories and stores closed their doors, workers were let go and foreign companies and banks abandoned contracts.
Looking back on it now, analysts agree that maybe the subsidies were a bit over the top. Pedro Banda, director general of the Institute of Concentration Photovoltaic Systems—one of the research institutes in Puertollano—said, “everyone from all over the world was installing in Spain as fast as they could, and every biologist who could add was working in solar.”
One reports says that even inefficient, poorly designed plants were able to make a profit, and speculation in solar building permits became commonplace.
Now that the storm has passed, there may be some benefits to the solar bubble. Research institutes in the city continue to develop cutting edge technologies. Unemployment, though it jumped back up to 10 percent, has not returned to 20 percent. And the city is now home to a number of solar businesses.
Oh yeah, and the sun continues to shine.
Energy Probe is a keen supporter of renewable energy. We believe renewable energy has the ability to diversify our electricity supply, while allowing for more decentralized sources of power for consumers. But we’re not in favour of throwing massive subsides at forms of energy that are either not technically or economically feasible.
Read the previous gangrene economy report, "Windmills lining the pockets of Britain’s wealthy landowners" here.