ELECCIÓN DE LOS SERVICIOS A TRANSMITIR

In the renewable energy production of the EU member states, it was the cheaper, more mature technologies that began to gain ground first, thus the 2000s witnessed wind turbines becoming more and more widespread. 2010 onwards, however, photovoltaic (solar/PV) systems took over the leading role with respect to the annual amount of newly installed renewable capacities. The solar capacities installed in 2010 only slightly exceeded the capacity expansion in wind power, with a yearly total for EU member states of 12.000 MW and 9.295 MW, respectively (EWEA, 2011, p.7). The difference grew significantly larger in 2011; solar panels, at 21.000 MW, accounted for 66% of the total amount of renewable capacities installed that year, while wind turbines reported a „mere‖ 30% at 9.616 MW (EWEA, 2012, p.7). Solar power stations took over the leading role not only in renewable investments, but, by 2011, in total Community investment into energy production capacities, as well, as shown in Figure 8 below:

82

Figure 8: Energy production capacities installed in the EU

Source: EWEA, 2011, p.7.

2008 saw renewable energies becoming dominant in terms of newly installed capacities. Within the category of renewable power plants, wind turbines had held the first place until 2009, yet solar power stations took over the lead in 2010. In 2011, renewables accounted for 71.3% of total new power plant capacities; out of that, 41% were solar panels and 21% were wind turbines.

The growth of PV power stations in recent years has had two main causes. First, the continuous development and gaining ground of the technology, which has rendered the price of solar panels more and more competitive. Second, some countries with feed-in tariff schemes in place have achieved an expansion in PV capacities way beyond their expectations, resulting in the heavy criticism of FiT schemes.

Development in this technology is rapid and very intensive. Each time the amount of installed capacities was doubled, it brought a 20% drop in the price of PV panels (Jäger-Waldau, 2009). It was in 2004 that the installation of PV capacities truly began to gain momentum. The then global capacity of 3.9 GWh doubled in the course of the next three years to 9,5 GWh in 2007, then it doubled again within 2 years’ time, by 2009, to 23 GWh, which also increased to almost double its previous value in 2010, into the 40 GWh range (REN 21, 2012, p. 35). Thus the growth rate is accelerating, the industry is developing at an ever higher rate, solar panels are becoming cheaper and cheaper, and the technology more and more competitive.

83

In Europe, average PV panel prices hovered around 4.2 EUR/Watt in 2000, which fell to 1.2 EUR/Watt, less than one-third of the initial value, during the next ten years, as detailed in Figure 9 below:

Figure 9: Average price of PV modules in Europe

Source: EPIA, 2011, p.14.

The downward trend in the price of modules is likely to continue (EPIA, 2011), (Wand – Leuthold, 2011). Given that the action plans of the member states set the target of nearly quadrupling their 2010 solar production capacity of 26.146 MW to 91.420 MW in 2020 (Jäger-Waldau et al., 2011), the regulation of this part of the sector will have to be an area of top priority in coming years.

Operating an appropriate promotion system in this rapidly developing sector constitutes a serious challenge. Problems may arise not only from the intensity of technological development, but from information asymmetry, as well; after all, it might very well happen that the policymaker, or even the investors, do not have perfect, up-to-date information on the current characteristics of solar panels. Therefore the marginal cost of solar modules is very difficult to estimate, hence it is more reasonable to establish a range, rather than one specific value as an estimate (Szabó et al. 2010).

In comparison to wind turbines, solar panels are much faster to manufacture, to install and to build a system from. And while by wind power stations, we mean vast steel structures and turbines with a relatively mature technology, solar modules are, in comparison to an average citizen’s image of a power plant, far more simple and contain no moving parts. Therefore their development is much faster, less predictable and capable of producing much more impressive results. In recent years, several European countries have witnessed the installation, within a relatively short time, of

84

a surprising volume of solar capacities, by far exceeding the expectations of the policymaker, and resulting in power grid management problems and in end consumer prices getting out of control. The IEA lists four major factors that may have caused this phenomenon, which the literature also refers to as PV bubbles (International Energy Agency, 2011, pp. 128-129):

– PV technology is modular, easy and quick to install and accessible to the public.

– PV investment opportunities were offered to both individuals and professional investors, as they constituted a long-term, low-risk instrument, with returns sometimes well in excess of that of government bonds.

– The central monitoring of installation costs by the policymaker was rather cumbersome, given that the installed solar panels exhibited an enormous variety in type and size and that, except for a couple of countries, system operators had neither the experience nor the means of integrating these into their network.

– Certain countries used excessive incentives for PV technology, which provided unnecessarily high returns for investors, resulting in a surge in the number of projects.

The phenomenon first became visible in Spain, where in 2008, the sum total of PV capacities in operation reached 4 GW, which was ten times the plan for that year. In Italy, the peak year of the rush was 2010, with 3.5 GW in operation and further 4 GW awaiting grid access. Yet the extent of the problem was the largest probably in the Czech Republic, as its 1.9 GW of solar PV capacity figure at the end of 2010 already exceeded the target set for 2020 in its national action plan. Germany, as well, experienced a striking expansion in PV capacities: the capacity growth in 2010 was double the target laid down in the action plan (7.4 GW). One surely has to admit, as well, that the country’s 2020 photovoltaic targets are indeed ambitious at 52 GW, out of which, however, 17 GW were already installed at the end of 2010 (International Energy Agency, 2011).

As a consequence of all the above, nearly three quarters of the world’s solar PV capacities were concentrated in these European countries by the end of 2010:

85

Figure 10: Distribution of PV capacities at the end of 2010

Source: REN21, 2012, p.23.

As evinced by the figure, Germany is known to hold nearly half of the world’s solar PV capacities, Spain and Italy are coming next (as far as Europe is concerned), with about 10% each; the Czech Republic and France have 5% and 3%, respectively. A factor that has exacerbated the issue in the Czech Republic is that it has achieved this relatively high value in spite of the country’s limited size and less favorable conditions (in comparison to Mediterranean countries), and to top it all off, the growth has been relatively sudden, i.e. expansion was not gradual. The peak occurred in 2010, when the country placed third, with 1.5 GW, in the global ranking on the yearly amount of installed PV capacities (CPSL-REKK, 2012); the cause was the relatively high value – in comparison to the rest of the countries – of the feed-in tariffs offered in 2009-2010 for ground-mounted solar power capacities (Regionális Energiagazdasági Kutatóközpont, 2012, p.73).

Given that all the countries we mentioned employed feed-in tariff schemes to promote photovoltaics, which are, if the policymaker is not sufficiently informed, prone to cause excessive feed-in tariffs and hence similar bubbles, the correction of this deficiency seemed to be „the way out‖ of the situation. An indicator of the severity of the deviation from the plan in the growth of solar PV and of the maturity of the country’s regulation is the way how the policymaker handles the issue. Reactions basically took three forms (Regionális Energiagazdasági Kutatóközpont, 2012):

– reducing the feed-in tariffs in certain segments (mainly for large-capacity, ground-mounted power stations);

86

– increasing the frequency of scheme reviews in order to ensure that tariffs keep in line with technological progress;

– introducing annual volume limits on the capacities eligible for a guaranteed purchase agreement.

Spain introduced annual quotas, distributed on a quarterly basis, and feed-in tariffs were also reduced by nearly 30% for new projects. In 2010, the feed-in tariffs of existing projects were reduced by 10-30%, as well, which is sure to remain effective at least until 2014. Germany started a gradual reduction of the feed-in tariffs for new entrants in 2009, which have therefore become about one-third lower by now. The degree of future tariff reductions will depend on the volume of the capacities installed in the meantime. Italy reduced its tariffs by 20% from 2010 to 2011, and the feed-in premium system was replaced with a fixed-tariff scheme. The reaction of the Czechs may be considered the most drastic one: feed-in tariffs for new capacities were nearly halved, and a 26% income tax was introduced for all capacities installed since 2009 with retroactive effect (Regionális Energiagazdasági Kutatóközpont, 2012); (Jäger-Waldau et al., 2011).

The above steps managed to curb the PV boom by 2011, except for Italy, where capacity expansion in 2011 was still very high (three times the amount of 2010). Most striking for the industry were the policy changes having retroactive effect – investors can, however, adapt to tariff reductions for new entrants if communicated in advance. As we have seen, inappropriate tariff values may lead to very serious problems and create an unpredictable environment. The governments of Spain and the Czech Republic were sued by several groups of investors over retroactive legislation, and capacity expansion in 2011 was practically zero.

The literature often refers to PV bubbles as an inherent flaw in FiT schemes. However, as we have already established in our theoretical overview, policymakers have to assume broader responsibilities in a FiT scheme, and a technology with rapidly changing marginal costs may be easily diverted from its intended path by an obsolete tariff. And the particularly rapidly developing technology of solar panels proved out to be particularly fertile ground for such derailment. Worth mentioning is, however, that similar problems have recently surfaced in two countries with differentiated certificate schemes, Romania and Bulgaria; after all, the proportions of

87

the per unit numbers of green certificates issued to the different technologies need to be determined by the policymaker in this sort of scheme, as well. In Romania, a proposal to reduce the number of certificates for PV from 6 to 4 is currently pending a decision, while Bulgaria introduced a near 30% network access fee for solar power stations already installed during 2012, thus the industry has significantly lost in attractiveness (Florea, 2012). Thus PV bubbles did not only develop in FiT countries, but under TGC policies, as well.

Given that the national action plans suggest a substantial expansion in PV capacities in coming years, as well, it is essential that the regulation be prepared to correctly handle the phenomenon. Policymakers may avoid such issues by ensuring they are sufficiently informed, by having an active dialogue with the industry and, concerning FiT schemes (the category that the Hungarian regulation falls into, as well), by rigorously updating and reducing tariffs with time, along with adding a tiny bit of a quantity-based approach (annual quota, tariffs changing with total installed capacity).