Lawrence Solomon: Nightfall on the solar industry

Solar may be a renewable technology but government subsidies to it aren’t, Europe’s solar industry is learning.

In Spain, under a 2007 law that guaranteed 25 years of way-above-market prices to solar power developers, industry invested $22-billion to reduce greenhouse gas emissions and make Spain the solar showcase of the world. Now that Spain is flirting with bankruptcy, the government is planning to rescind those guarantees, the Spanish press reports.

Under the government’s expected change of mind, the revenue of most existing solar-power plants would be cut by 30% and for new ground-based photovoltaic generators by 45%. The government would rescind fewer subsidies for roof-mounted panels: 25% cuts for large roofs and 5% for small roofs. The result, according to Tomas Diaz, director of external relations at the Photovoltaic Industry Association in Madrid, would be bankruptcy for most of the country’s 600 photovoltaic operators.

In Italy, the government plans to scrap guaranteed prices paid to owners of so-called green certificates, which represent greenhouse-gas-free power. Without those guarantees, says the head of the Association of Foreign Banks in Italy, solar and wind companies that obtained some $6.8-billion in loans may be unable to make their loan payments, leading to widespread default. About two-thirds of Italy’s green loans come from outside the country. More loans to the sector are now in doubt.

In Germany, prospects have also dimmed for the renewable industry, with the government scaling back its renewable power incentives. The UK has already announced a review of renewable subsidies, leading Denmark’s Dong Energy, which accounts for a third of UK offshore wind capacity, to say future investments may dry up.

The exit of governments from the renewable subsidy field follows a collapse in public support for the theory that manmade global warming is a serious problem. Because the public no longer buys it, the politicians no longer fund it.

Lawrence Solomon, Financial Post, June 18, 2010

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