A New Look at the Impact on Photovoltaic Plants of the Reform of the Spanish Support Scheme for Renewables

Abstract

In this paper we break down the change in PV plant revenues resulting from the 2013 reform of the Spanish renewable support scheme into two sources.The first lies in the difference between the current tariff and what the investor would have received under the original scheme. Taking into account the characteristics of the new tariff, we observe that the impact of the reform was particularly harmful for more productive plants while less productive even benefited from the reform. In this sense, our findings suggest that the impact of the reform varied significantly between plants, in contrast to the presumptions of the previous literature. The second source of revenue changes lies in revenue forecasting errors in assessing investment projects, i.e. optimistically biased revenue forecasts. The relevant literature has not focused on this second source but our findings suggest that revenue forecast errors may have played a role in explaining the liquidity problems claimed by investors, i.e. predicted revenues were higher than what the plant would have earned under the original scheme.

Keywords: Electricity, Renewable, Photovoltaic Plant, Investment, Support Scheme