Solar panels on the rooftops of Spain are likely to pay for themselves within five years without needing subsidies and revive an industry in the doldrums after the country became the world's second-largest producer. Analysts predict the cost of small rooftop panels will become competitive with retail power prices long before the cost of larger, ground-based plants, which must compete with lower wholesale prices for electricity produced from gas or coal.
"We believe that commercial and residential rooftop solar power generation has great potential in Spain, and across Europe," said Rupesh Medlani, an analyst with Barclays Capital. "Panel price falls in recent years combined with higher retail energy costs has made the economics far more attractive." Solar power currently provides 2 percent of Spain's electricity, but producers need subsidies to operate plants.
Wholesale power prices in Spain are around 5 eurocents a kilowatt-hour. Consumers typically pay 17 eurocents, and the costs of roof-mounted panels are expected to fall below that level by 2016. Industry group Asif estimates that sunlight falling on just 1.1 percent of Spain's surface area could provide all of the country's energy needs - not just electricity - which is less than half the 2.3 percent already taken up by urban areas.
"You wouldn't even have to cover all the roofs in Spain with solar panels," said Asif spokesman Tomas Diaz. "There is the issue of how you would do it, how you manage demand for electricity, but there is no problem at all over area or potential," he added. Photovoltaic panels, which directly convert sunlight into electricity, produce power directly for the consumer and avoid losses along transmission lines, which eat up around 8 percent of all power generated by utilities.
Rooftops also could cut out the need for solar plants to use up valuable hectares of farmland. Spain has so far installed few rooftop panels, however. A draft decree awaiting approval by Spain's energy regulator plans to make it easier for consumers to finance solar panels by allowing them to feed any power they do not use into the grid. Utilities would then discount the surplus from the final bill, a practice known as "net metering", which is already on the statute books in Germany and 43 US states.
A recent report by accountants KPMG estimated rooftop units in Spain could cut electricity consumption by 60-80 percent for residential buildings and 40-60 percent for commercial or industrial premises by 2015. Germany is the world's biggest solar power producer, with more than four times the generating capacity of second-placed Spain, although it receives less than one-third as much sunlight. Most of its installations are on rooftops.
"Spain in many regions has a lot more sun-hours, so therefore if the economics work in countries like Germany and the UK, then there's no reason to think the economics can't work in a country like Spain," said Peter Sweatman, chief executive of consultants Climate Strategy. Asif estimates that rooftop panels are already cost-effective in the southerly Canary Islands, where grid connections are relatively scarce and expensive.
The International Energy Agency, an adviser to industrialised nations on energy policy, estimates solar power could provide up to a quarter of the world's electricity by 2050 but will need government support before the technology becomes cost effective. Generous feed-in tariffs made Spain the world's biggest solar market in 2008 but cost the government billions of euros. It then capped the number of plants entitled to support and last year cut feed-in tariffs for existing plants by 45 percent.
Diaz said financing a residential PV panel for 10,000-25,000 euros ($14,050-35,130) - comparable to other building work - is far simpler for an installer than a utility-scale project. "He won't ask for project finance. He will ask for credit but won't run into financial restrictions faced by other PV projects," he said.
Sweatman said commercial and industrial users are better placed to finance rooftop installations, and KPMG predict they will make up the bulk of Spain's PV capacity by 2020, which could be four to five times current levels. On Madrid's main artery, the Paseo de la Castellana, rooftops are already sprouting solar panels where signs or billboards used to be. Barcelona's Montjuic municipal cemetery has installed solar panels to help power its crematoria and reduce its dependence on the grid by 34 percent. The 300,000 euro project is designed to generate 136,000 kWh a year over a working life of 25 years, which would be enough to power 46 homes.
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