Dramatic retroactive reductions to Spain’s solar support regime have led to furniture giant IKEA cutting its losses on a 10MW PV plant and handing the keys back to the bank.

The government has announced that it will scrap the feed-in tariff system instead establishing payments that cap the profit of any solar park at 7.5% of the initial investment. Trade group Unión Española Fotovoltaica (UNEF) said that the IKEA casualty could be a sign of things to come.

A study by UNEF found that the changes will cut solar incomes by an average of 25% with larger systems losing as much as 50% of projected their income.

“This is going to have a dramatic effect on the Spanish solar industry and Spanish solar investors,” Jose Donoso, director general, UNEF, told PV Tech. “Most projects will have a reduction in income of 25-50%. Most people will try to renegotiate with the banks but for larger projects this solution will not be possible, the cuts are too great. These people will go bankrupt.”

The losses proved too great for IKEA’s 10MW plant in Cuenca and the company has now handed the keys to the plant back to the bank. The €65 million project was funded largely by Banesto, now part of the Santander banking group.

IKEA has been praised for its efforts to install solar on its stores' rooftops and plans to sell panels in its UK stores but its Spanish subsidiary decided to cut its losses after the retroactive changes took hold.

“We will see more examples of projects being handed back to banks in the future. The banks best bet to recover the money so to continue operating the projects but it is a very difficult situation,” said Donoso. “The banks are increasing the overall cost of finance. Most projects were funded at a rate of between 4-6%. Now they are offering between 9-10%.”

The changes are not just affecting project developers and investors. Donoso said the Spanish market’s decline is also forcing changes among the country’s PV manufacturers.

“In the next few years there is no possibility for manufacturer to sell anything in Spain. They must look to sell everything overseas, there is no domestic market for them anymore,” he said.