The feed-in tariff: tripping up unexpecting countries

Share on facebook
Share on twitter
Share on linkedin
Share on reddit
Share on email

The arrival of the feed-in tariff (FiT) was a much-anticipated one, something that would boost the solar sector and give countries around the globe the incentive they needed to convert from conventional energy sources into the renewable sector. No one could have predicted the upheaval that could have been brought with this seemingly positive move.


The first and most prominent downfall came in the shape of Spain. It introduced its generous FiT rate of up to €0.44/kWh back in 2007 when the government expected a steady stream of investment. In response, there came a flood.

The country was left accounting for more than 40% of the world’s total solar installations in 2008. This huge uptake gave the powers-that-be no choice but to revise the FiT rate, causing Spain to became one of the principal causes of the downturn in the solar industry.
Some might say that the evident success stories of other countries like Germany caused a trend to be set for others. Yet in their infancy, unrevised policies could simply not cope with the unexpected.

Unlike Germany, Spain had no system built in to reduce tariff rates if its capacity targets were exceeded. Indeed, there were no stepped reductions, or digressions, at all. There was no ability to react.

While the Spanish government had expected it would not see 400MW of solar capacity in the country until 2010, by the autumn of 2007, some 350MW had already been installed. Chinese solar firms were sending container after container, laden with solar panels, to the country.

Scrambling, the government upped its target to 1,200MW. But as it became clear the market would exceed that limit, too, the boom became a frenzy as developers rushed to connect their projects to the grid before last September, when the government altered the tariff, dropping rates by 30%.

Many businesses have since felt burned by the boom and bust engendered by the tariff, facing accusations of fraud, based on claims that they had connected to the grid by the government’s deadline of Sept. 29 of that year.

The government’s revised tariff has set a hard cap of 500MW to be built, most of this as more costly rooftop installations. Revisions to the tariff are made on a quarterly basis. Demand remains high, however, with 2,468 applications having been received recently, according to the Ministry of Industry, Tourism and Trade.

Czech Republic

Unfortunately, this isn’t the end of the tale. Next to fall at the foot of disaster was the Czech Republic. Since the state began supporting solar energy projects in 2005, the country has seen a similar reaction to the support of solar PV as Spain. The FiT rate, locked in for 20 years, fixed the price of solar power between €0.50/kWh and €0.52/kWh and limited cost decreases to 5% per year, even as the cost of producing solar energy falls 10% annually, according to the Energy Regulatory Commission. This FiT rate led to an outstanding 24,678% increase in solar energy plants, from nine in 2005 to 2,230 as of August 2009, as investors came to cash in on guaranteed profits.


Next on the chopping board was Korea. At a meeting on August the 24th, the Korean Green Growth Committee proposed plans to decrease support for large-scale solar systems. New government proposals also suggest a cap of 98MW for 2009, 132MW for 2010, and 162MW for 2011, well below expectations of 340MW, 400MW, and 500MW in 2009, ’10, and ’11, respectively.

In terms of Korea’s prior solar program, which was considered to be highly attractive with 20-year FiT of €0.37/kWh for systems up to 30kW, €0.35/kWh for systems between 30 and 200kW, €0.32/kWh for systems below 3MW and €0.27/kWh for systems above 3MW.

Under the new program, 2009 subsidy could be increased for small systems, decreased for large systems. The proposed rates, which are currently under discussion are as follows: a) below 30kW system – increase subsidy by 10%, b) below 200kW system – increase subsidy by 5%, c) below 3MW system – decrease subsidy by 5%, d) above 3MW system – decrease subsidy by 10%.


And, of course, this story would not be complete without a similar road-to-failure story from the U.S. The Salt River Project, the main utility in Phoenix, cut its homeowners’ rebate by 10% in June 2009. The utility spent more than it budgeted for solar power, a result of a surge in demand as more solar installers moved into Arizona and government incentives kicked in.

California has steadily and somewhat quietly been bringing down its rebates with an imminent 29% cut in rebates offered within the service area of Pacific Gas and Electric, the dominant utility in Northern California.

Even if falling rebates cancel out some of the solar panel price slump, more innovative financing strategies are also helping to make solar affordable for homeowners. This year about a dozen states (following moves by California and Colorado last year) have enacted laws enabling solar panels to be paid off gradually, through increased property taxes, after a municipality first shoulders the upfront costs.

So, let this be a lessen learnt to all the countries which are currently molding the look of FiT rates, such as the UK, which is nearing the end of its three month consultation period. A good market strategy is a revised market strategy – rushing into a policy driven by profit is never a recipe for success.

21 September 2021
C&I consumers currently source only about 7% of their power requirement directly from renewables. Indian corporate renewable market has grown rapidly and holds huge growth potential as companies look to reduce power purchase costs and cut carbon emissions. BRIDGE TO INDIA has built significant expertise in the corporate renewable business by working on over 30 consulting assignments and various research reports. We are organizing this conference to bring all stakeholders together and delve deeper into various market aspects. The conference will be held on a virtual platform with excellent networking opportunities for all participants.
22 September 2021
To commemorate the World Energy Storage Day(WESD) on 22 September, being recognized worldwide, Customized Energy Solutions (CES) and India Energy Storage Alliance (IESA) is organising the 5th global conference and virtual expo, which will be held virtually on 22 September 2021. WESD is a global movement initiated by various apex trade bodies working to promote and adopt energy storage, e-mobility & green hydrogen technologies for a sustainable future. The forthcoming edition of WESD is expected to attract global participation with an intent to facilitate bi-lateral trade, market development and new research and innovation, which will invite 100+ countries, 100+ regulators & policy makers, 100+ International speakers,1000+ organisations, 100+ partners & exhibitors and 20,000+ global delegates.
28 September 2021
Solar Solutions International is the largest trade show for solar energy in Northwest Europe. Now the solar market has grown up, it's time for the next step. Solar Solutions International displays more than 500 innovations and over 100 practical seminars concerning the latest in energy storage, smart products, and an ever evolving array of solar panels. As an exclusively B2B trade show, Solar Solutions International offers both exhibitors and visitors the chance to network at the highest level. Duurzaam Verwarmd, the largest trade show for sustainable HVAC technology in the Benelux, is held simultaneously. This way your one visit gets you up to date with all of the developments in both sustainable energy and heating.
6 October 2021
Intersolar Europe is the world’s leading exhibition for the solar industry. It takes place as part of The smarter E Europe – the continent’s largest platform for the energy industry. Under the motto “Connecting solar business,” manufacturers, suppliers, distributors, service providers and project planners and developers from around the world meet in Munich every year to discuss the latest developments and trends, explore innovations firsthand and meet potential new customers.
6 October 2021
The future is bright for a new era of US solar and storage, and the 8th annual Solar & Storage Finance Summit will provide opportunities to discuss solutions to the industry’s challenges and provide a networking platform designed to bring together the top minds in the industry to do business. With a mix of high-level, informative presentations and panels, a stellar cast of speakers and audience members with deal-making capacity, the 2021 edition of the event will be a sell-out success.
18 October 2021
Intersolar South America, South America’s largest exhibition and conference for the solar industry, takes place at the Expo Center Norte in São Paulo, Brazil on October 18–20, 2021, and has a focus on the areas of photovoltaics, PV production and solar thermal technologies. At the accompanying Intersolar South America Conference, renowned experts shed light on hot topics in the solar industry.

Read Next

September 21, 2021
A round-up of the latest news from the US PV sector, including project developments from Ørsted, Candela Renewables and CEP Renewables.
September 21, 2021
New York’s governor has proposed an expansion of the NY-Sun distributed solar incentive programme and revealed plans for two transmission projects that will transport renewable energy to New York City to help the state reach 70% renewable electricity by 2030.
September 21, 2021
German solar installer Enpal has raised €345 million (US$405 million) in debt financing to fund the deployment of more than 15,000 household solar PV systems
September 21, 2021
India added 521MW of rooftop solar in Q2 2021, an increase of 517% compared to the 85MW added in the same quarter last year despite a slight increase in costs, according to a Mercom India report.
September 21, 2021
Private equity firm American Securities has secured a deal to acquire US solar engineering, procurement and construction (EPC) provider Swinerton Renewable Energy and its operations and maintenance (O&M) subsidiary SOLV from Swinerton Incorporated.
September 21, 2021
FIMER has launched two new platforms for the utility-scale solar sector, the PVS-350-TL string inverter for decentralised applications and the PVS-260/PVS-300 modular conversion solution designed for centralised applications.

Subscribe to Newsletter

Upcoming Events

Solar Media Events
October 6, 2021
Solar Media Events
October 19, 2021
Solar Media Events
December 1, 2021