Booms, Busts, and Retroactive Cuts: Spain’s RE Odyssey

Analytical Brief

Much ink has been spilled over Spain’s recent solar energy boom-and-bust. In response to generous tariffs and loose oversight, developers in Spain installed over 2600MW of solar PV capacity in 2008, or roughly 50% of global installations that year.

This rapid market growth overwhelmed policymakers and prompted a drastic policy change, including a 500MW annual cap on future installations and a new auction mechanism to award future contracts. Since the bust, many have cited the Spanish experience as a cautionary tale for policymakers worldwide, an example of how not to finance renewable energy.