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 has recently been adopted in Spain as a response to escalating support costs, which have mostly been related to solar PV promotion. The new remuneration scheme can be considered retroactive and negatively affects the profitability of existing solar PV plants. The aim of this paper is to analyse the implications of the new retroactive regulation on the profitability of those plants in Spain. Using real data from a very common PV plant, the results show that, indeed, 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 several factors, assumptions and scenarios.