Analysing the economic impact of the new renewable electricity support scheme on solar PV plants in Spain

Abstract A complex regulatory package implementing a new support scheme for renewable electricity was adopted in Spain in 2013 as a response to escalating support costs, which have mostly been related to solar PV promotion. A lot has been written about the retroactivity of the new Spanish regulation and its negative impact on investors’ confidence and future deployment. The aim of this paper is to analyze the implications of this regulation on the profitability of those plants in Spain. Using real data from a very common PV plant, the results show that the new support scheme has a considerable impact on the cash-flows of those plants. However, our simulations also show that the degree of reduction in the internal rates of return critically depends on different factors. Under some restrictive assumptions, the savings in support costs due to the new regulation are only around 7.6% if remuneration for investment is maintained after 2019, and around 57% if such support is removed after 2019.

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