In September 2002, Spain was the first European country to introduce a “feed-in tariff“ funding system for solar thermal power. This granted a premium payment of 12 € cents for each kWh output of a solar thermal plant between 100 kW and 50 MW capacity, which could be changed every four years. It turned out that this was not bankable and that the amount did not cover the cost and risks to make the first projects feasible. Therefore, the solar thermal premium was increased in 2004 by 50% to 18 € cents/kWh under Spanish Royal Decree 436, and guaranteed for 25 years, with annual adaptation to the average electricity price increase. This removed the concerns of investors, banks and industrial suppliers and launched a race of the major Spanish power market players to be among the first 200 MW, the most prominent being:

• 10 MWe solar-only power tower plant project Planta Solar (PS10) at Sanlúcar near Sevilla, promoted by Solucar S.A., part of the Abengoa Group, together with partners, and employing saturated steam receiver technology. The PS10 project has received a €5 million grant from the European Union’s Fifth Framework Programme. Construction started in summer 2004 and will be completed in 2006. Project development of the following two 20 MW power tower plants PS20 of the same type has started. Abengoa has also started to develop various 50 MW parabolic trough plants.

• 15 MWe solar-only power tower plant Solar Tres project is promoted by the Spanish company SENER employing US molten-salt technologies for receiver and energy storage. Solar Tres will have a 16-hour molten-salt storage system to deliver this power around the clock. The Solar Tres project has received a €5 million grant from the EU’s Fifth Framework Programme.

• 15 MWe solar trough power plant EuroSEGS at Montes de Cierzo near Pamplona, promoted by the Spanish EHN group in co-operation with SolarGenix.

• Two 50 MWe solar trough power plants, AndaSol-1 and 2, are being promoted jointly by ACS Cobra and the Solar Millennium group in the region of Andalucia, with a 510,120 m² SKAL ET solar collector field and six hours’ thermal storage. The AndaSol-1 project has received a €5 million grant from the EU’s Fifth Framework Programme and financial support from the German Ministry for Environment. Construction will start in autumn 2005 and will be completed in 2007. ACS Cobra and Solar Millennium have started development of various 50 MW follow-up plants in Southern Spain.

• National electric utility companies, such as Iberdrola and Hidrocantabrico-Genesa, have started promotion of over a dozen 50 MW parabolic trough plants all over Southern Spain.

How Spain supports solar thermal power

Law 54/1997, which introduced competition into the Spanish electricity sector, also made this principle compatible with the achievement of other objectives, such as improving energy efficiency, reducing consumption and protecting the environment, all vital to meet Spanish commitments to reduce greenhouse gases. The Spanish Royal Decree 2818 of 1998 followed this by establishing a special legal framework which granted favourable, technology dependent feed-in premiums for renewable electricity generation. However, only the incentive premiums for photovoltaic electricity generation were allowed to exceed the limit of 90% of the average sales price. In 2000, any solar electricity generation was exempted from this limit, treating PV and CSP equally. In 2002, a first incentive premium for solar thermal plants of 12 € cents/kWh was introduced, which did not cover the costs of the first plants.

Therefore, the solar thermal premium was increased in 2004 by 50% to 18 € cents/kWh under Spanish Royal Decree 436 which, for the first time since the vintage Standard Offers of California in the late eighties, made solar thermal power projects bankable and attractive for investors through the following factors:

• It grants the same tariffs for PV and solar thermal from 100 kW to 50 MW

• A premium on top of the electricity pool price of 0.18 €/kWh for the first 200 MW of solar thermal plants, which roughly equates to a total price of 0.21 €/kWh

• Bankable with 25-year guarantee

• Annual adaptation to electricity price escalation

• 12-15% natural gas back-up allowed to grant ‘dispatchability’ and reliable capacity

After implementation of first 200 MW tariff it will be revised for subsequent plants to achieve cost reductions.

In the “Plan for Promotion of Renewable Energies in Spain”, approved by the Council of Ministers in December 1999, the installation of 200 MW of solar thermal plants is planned by 2010.

This last incentive finally covers the costs and has motivated prominent players in the Spanish power market to launch over a dozen 50 MW solar thermal projects, so that raising the 200 MW limit to 500 MW or more is now under discussion.