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Spain Approves 'Sun Tax,' Discriminates Against Solar PV

Until recently, Spain had a very general self-consumption policy framework that applied to both grid-connected and off-grid systems. This month though, Spain's Council of Ministers approved a new self-consumption law that has set the country's solar advocates up in arms with the government. 

The main problem with the new law, say solar advocates, is that it taxes self-consumption PV installations even for the electricity they produce for their own use and don’t feed into the grid. Spain's PV sector calls the new law a 'sun tax.’ 

According to Spain’s Photovoltaic Union (UNEF), the new law requires self-consumption PV system owners to pay the same grid fees that all electricity consumers in Spain pay, plus a so-called 'sun tax'. Specifically, said UNEF, a self-consumption PV owner "will pay a 'sun tax' for the whole power [capacity] installed (the power that you contracted to your electricity company, plus the power from your PV installation) and also another [second] 'sun tax' for the electricity that you generate and self-consume from your own PV installation (this applies to installations larger than 10 kW)." 
Installations smaller than 10 kW and all installations in the Canary Islands and the cities of Ceuta and Melilla (these are Spanish territories in Africa) will be exempted from the second 'solar tax.' Furthermore, installations with co-generation will be exempted of the second 'sun tax' until 2020 and the Balearic islands of Mallorca and Minorca will pay a reduced price. Off-grid installations will obviously not pay any grid tax whatsoever. 


The new law also prohibits PV systems up to 100 kW from selling electricity. Instead, their owners are required to donate the extra electricity to the grid for free. Systems over 100 kW must register in order to sell electricity in the spot market for the excess power they generate. Limitations do not end at this point though. Thus, for PV systems up to 100 kW the owner of the installation must be the owner of the contract with the electricity company, while community ownership is prohibited altogether for all sizes of self-consumption systems. 


Finally, the law is retroactive meaning that all existing self-consumption PV installations need to comply with the new regulations otherwise face an astronomically high penalty fee up to €60 million. This sanction, UNEF notes, is double the fine set for radioactive leaks from nuclear plants. 

The Islands' Paradox 
Regarding Spain's non-mainland territories, the new law makes even less sense, argues UNEF, since the cost of electricity supply is particularly high (about €184 per MWh in the Canaries and €139 per MWh in the Balearics), adding €1.8 billion to the Spanish consumers' total electricity bill. On the contrary, UNEF adds, self-consumption systems have costs below €100 per MWh and are an ideal solution for island territories where self-supply generation, at the point of consumption, is more economical than power transmission from the peninsula.

What Went Wrong? 
Overall, UNEF says, "each kWh imported from the grid by a self-consumer will pay double tolls compared to a kWh imported from the grid by another consumer." The new law, it adds, makes it uneconomic for households and businesses to install PV with the latter endangered to loose in competitiveness too.

The government says the law does not impose taxes but that the fees are a contribution to overall system costs. Indeed, in other regions where self-consumption (and elsewhere net-metering) systems are in place, policies allow for some grid-connection fees that cover the usage of the network by the self-consumption installations. In practice, self-consumption installations use the grid as a battery and it makes sense that they should pay for it. However, this is not the Spanish case. Nowhere in the world are self-consumers taxed for the electricity generated for own usage. It makes sense to apply a small fee to the electricity exported in the network, but customers shouldn’t have to pay taxes for the self-generated electricity to be consumed on site, say Spain’s solar advocates. 

Renewable Energy World ran an analysis on the Spanish government’s attitude against solar in July, expanding on the fallacies of Spain's energy policy. This week’s announcement is another indication that the Spanish government is in favor of a centralized energy system, which is a reflection of the past. 


“It is clear the energy policy of the conservative party currently ruling the country does not want to encourage distributed generation, net metering or self-consumption schemes," José Donoso, UNEF’s general director, said. "The Spanish government clearly supports the energy model of the last century where few, very powerful utilities dominate the electricity market. It does not want more actors participating in the electricity market." 

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