Solar Industry Learns Lessons in Spanish Sun
Two years ago, this gritty mining city [Puertollano] hosted a brief 21st-century gold rush. Long famous for coal, Puertollano discovered another energy source it had overlooked: the relentless, scorching sun.
Armed with generous incentives from the Spanish government to jump-start a national solar energy industry, the city set out to replace its failing coal economy by attracting solar companies. Farmers sold land for solar plants. Boutiques opened. And people from all over the world, seeing business opportunities, moved to the city.
But 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, and that the industry they had created might never produce efficient green energy on its own.
In September the government abruptly changed course, cutting payments and capping solar construction. Puertollano’s brief boom turned bust. Factories and stores shut, thousands of workers lost jobs, foreign companies and banks abandoned contracts that had already been negotiated.
In its haste to create a solar industry, Spain made some miscalculations: solar plants can be set up so quickly and easily that the rush into the industry was much faster than anticipated. And the lavish subsidies inflated Spanish solar installation costs at a time when they were rapidly decreasing elsewhere — in part because of increasing competition from panel makers in China, but also because higher volumes produced economies of scale.