Angel Miralda was proud of his 320 solar panels in a field near Benabarre, in northern Spain. They added 56 kilowatts of clean-energy capacity to a country that depended on oil imports. The panels cost 500,000 euros ($735,000): 150,000 euros <WC>came <WC1>from an early retirement payoff from IBM's Barcelona office, the rest from a bank loan. The government promised a 10 percent annual return on such projects. That was in 2008.<WC>
<WC1>Five years later, after subsidies were cut on July 12 for the third time since 2012, his income is down by 40 percent, and he is struggling to repay the loan.
<WC>"<WC1>There is no legal security in Spain," he complains.
Miralda is the victim of a bungled, overambitious renewables program.
Governments everywhere want to turn green and create environmentally friendly jobs. But as Spain shows, good intentions are not enough. If the policies are wrong, the benefits are wasted, the jobs disappear, the costs remain <WC>—<WC1> and business investors bear the brunt.
In 2007 Spain had just 690 megawatts of installed capacity of solar photovoltaic, or PV, panels. That was the year global PV prices started to fall, thanks to booming production in China. Hoping to stimulate a new green industry, for which sunny Spain seems ideal, the government increased the prices it paid for solar power to 12 times the market price for electricity.
In a sense, it worked spectacularly. According to research by CF Partners, a carbon-trading firm, solar PV capacity rose fourfold in 2008 alone.
Another technology for capturing the energy of sunlight, solar thermal, also grew hugely, albeit more slowly because it takes longer to deploy. Its installed capacity rose from 11 megawatts in 2007 to 1,950 megawatts now.
Renewable-energy output doubled between 2006 and 2012. At that point, Spain had the fourth-largest such industry in the world.
But costs exploded, too. Subsidies to renewable energy rose from 193 million euros in 2007 to 8.1 billion euros in 2012 (a 40-fold increase).