DER Opportunities in Spain

Despite the uncertainty created by the Sun Tax in Spain, the industry is growing again. According to the Spanish PV Union (UNEF), in 2017, the annual installed capacity increased by 145% thanks to new self-consumption facilities, growing from 55 MW in 2016 to 135 MW in 2017. This development has been driven by the high degree of competitiveness achieved by PV, the costs of which have reduced significantly in recent years.

Off-Grid DER Is Booming

Most of the growth in 2017 came from agricultural use and rural electrification. In most of these installations, distributed energy resources (DER) has an advantage as it competes with either high fuel costs in applications like water pumping that used diesel generators or, in the case of new rural facilities, with expensive grid expansion costs.

In this sector, the challenge now is to not to reduce the price, but to convince potential customers of the value DER installations can bring. For example, farming operations can reduce diesel consumption to power irrigation pumps by around 70% with the addition of a solar plus storage system, this type of installations have a payback of just a couple of years.

Commercial and Industrial Is Becoming Competitive

The introduction of variable demand charge on auto-consumption (the so-called Sun Tax) in Spain created the impression that distributed solar was doomed to fail as with this charge, installation would be too costly to operate. This impression has lingered although, with the lower cost of solar installations, a significant number of installations could be paid back in 5-7 years despite the variable demand charge payment. The local systems integrator Opengy, reported that 2017 was its best year since 2010, with around 18 MW in its project pipeline (compared to less than 10 MW in 2016 and 2015).

Residential Gaining Momentum

The residential market is also gaining momentum, although it is yet get significant numbers of installation in place. In the latest news from this segment, the challenger local energy supplier, Viesgo, announced in February 2018 a partnership with (the also challenger) Bigbank, to finance Viesgo’s customers that want to buy a DER system (that can include solar, storage, and even EVs). In this agreement, Bigbank offers a 6.95% credit to Viesgo customers, while Viesgo is in charge of installing and servicing the system and collect customer payments. This follows the news of sonnen and SOLARWATT, the German battery and shared energy platform providers, which both entered the market in the last 6 months.

In the Global DER Deployment Forecast Database report, Guidehouse Insights analyses the global market for DER technologies and assesses key market and technology trends. Driven by these trends, Guidehouse Insights estimates that Europe installed 29.1 GW of new DER capacity in 2017, generating $25.5 billion in revenue. Spain missed the mark of what DER can bring to a country, but the future looks sunnier.

While Spain is far from the leading DER market and local legislation is not especially welcoming to DER, the demand charge could be improved and the lack of a flexibility market limits the revenue streams DER could tap into. The country is finally waking up from its distributed generation nap and a combination of a better economy and better system economics are behind it. The utility-scale record low bids in last years’ tenders put renewables back in the front pages, this time with a positive note and word-of-mouth marketing about savings at the distributed level are creating a buzz. Once these trends consolidate, Spain could become the first European country to have a successful DER industry that does not rely on any type of incentive (direct or indirect) to thrive.