sustainability Article Spanish Photovoltaic Solar Energy: Institutional Change, Financial Effects, and the Business Sector Raquel Fernández-González 1 , Andrés Suárez-García 2 , Miguel Ángel Álvarez Feijoo 2,* , Elena Arce 2 and Montserrat Díez-Mediavilla 3 1 ERENEA-ECOBAS, Department of Applied Economics and Faculty of Economics, Campus As Lagoas-Marcosende, University of Vigo, 36310 Vigo, Spain; [email protected] 2 Defense University Center at Spanish Naval Academy, 36920 Marin, Spain; [email protected] (A.S.-G.); [email protected] (E.A.) 3 Solar and Wind Feasibility Technologies Research Group (SWIFT), Electromechanical Engineering Department, University of Burgos, Avda. de Cantabria s/n, 09006 Burgos, Spain; [email protected] * Correspondence: [email protected] Received: 7 February 2020; Accepted: 27 February 2020; Published: 2 March 2020 Abstract: Spain is a country with a high dependence on fossil fuels. For this reason, in 2007, it implemented a bonus system that aimed to encourage the production of renewable energies, particularly photovoltaic solar energy. These production bonuses, guaranteed by the Spanish government, led to an exponential increase in the number of companies in the market and, consequently, the MWh produced. However, in 2012, given the excessive budgetary burden involved in maintaining this “feed-in tariff” system and after several years of institutional instability, the aforementioned system of incentives for phoyovoltaic (PV) energy was eliminated. This paper has tried to analyze the consequences of this institutional change, a clear example of the “hold up” problem. For this purpose, a sample of 5354 companies, which was divided, geographically, into Spanish regions and, temporarily, into three different periods, has been taken, considering diverse economic and financial variables. The results show a notable weakening of the sector that, due to the effects of the regulatory change, has lost attractiveness and profitability for investors and is consequently suffering from stagnation, which has led to the disappearance of many companies in the sector. Keywords: Spain; solar photovoltaics; institutional frameworks for energy transition; hold-up problem 1. Introduction The high dependence on fossil fuels in some countries causes a high energy bill. Among them is Spain, which imports large quantities of fuel oil [1–4]. In 2000, 74% of the energy generated in Spain came from fossil fuels. By 2012, however, the share of fossil fuels had fallen considerably to 52% [5,6]. This drop of more than twenty percentage points was the result of active policies implemented by the Spanish government. In order to follow European policies in terms of implementing a less polluting and more diversified energy model, Spanish governments promoted the production of renewable energies, focusing especially on photovoltaic solar energy [7,8]. In response to its concerns about energy efficiency and climate change, the European Union (EU) Directive 2009/28/EC was approved, which set the goal that 20% of the EU’s energy consumption should be produced by renewable energies by 2020. This last decree shows how each member country takes into account the starting situation of the member countries and proposes different scenarios for each of them. Even so, the EU did not approve a common regulation for all its members, but rather it is they who decide how to promote it. Sustainability 2020, 12, 1892; doi:10.3390/su12051892 www.mdpi.com/journal/sustainability Sustainability 2020, 12, 1892 2 of 18 Sustainability 2020, 12, x FOR PEER REVIEW 2 of 18 Spain hashas veryvery favorablefavorable climate climate conditions conditions for for a a high high production production of of solar solar photovoltaic photovoltaic energy, energy, as itas is it one is one of the of the European European countries countries with with the highest the highest number number of hours of hours of solar of radiation. solar radiation. Figure 1Figure shows 1 theshows map the of climaticmap of climatic zones in zones Spain, in including Spain, including graphic indicators graphic indicators of daily insolation of daily overinsolation horizontal over surface.horizontal As surface. can be seen As can in the be seen figure, in thethe regionsfigure, the in the regions southern in the half southern of the country half of havethe country the greatest have potentialthe greatest for potential harnessing for thisharnessing energy. this For energy. this reason, For this the reason, government the government focused mainly focused on mainly this type on ofthis renewable type of renewable energy [9 ,energy10]. However, [9,10]. 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As aa result result of of this this urgent urgent need need to reduce to reduce the energy the energy bill and bill because and ofbecause Spain’s of favorable Spainʹs conditionsfavorable forconditions obtaining for cleaner obtaining and cleaner cheaper and energy, cheaper since energy, 2007, the since government’s 2007, the government energy decisionsʹs energy have decisions focused onhave implementing focused on implementing a very aggressive a very subsidy aggressive policy, subsidy which haspolicy, attracted which thousands has attracted of investors thousands and of hasinvestors led to and the Spanishhas led to solar the photovoltaicSpanish solar energy photovoltaic market energy experiencing market great experiencing growth ingreat the growth following in years,the following both in termsyears, of both MWh in producedterms of MWh and the produced number and of companies the number in theof companies sector (Figure in 2the). This sector is shown(Figure by 2). the This fact is that shown in 2007, by the photovoltaic fact that in production 2007, photovoltaic was assumed production to be 152 was MWh, assumed while to in 2010be 152 it reachedMWh, while 3842 MWhin 2010 and it reached in 2018 the 3842 figure MWh reached and in 4744 2018 MWh the figure produced reached [14– 164744]. This MWh policy produced had certain [14– positive16]. This results: policy ithad increased certain the positive weight results: of renewable it increased energies the in weight the Spanish of renewable energy mix energies and reduced in the 2 2 2 COSpanishemissions energy (7,5 mix t and CO2 reduced/capita in CO 2007;2 emissions 5,6 t CO (7,5/capita t CO2/capita in 2010; 5,2in 2007; t CO 5,6/capita t CO in2/capita 2018) in [5 ,2010;15]. 5,2 t COThese2/capita policies in 2018) led [5,15]. Spain to achieve excellent results, with a notable decrease in fossil fuel consumption. In 2011, Spain reached the third place among the countries with more production in Europe, which, in that year, was the world region where more photovoltaic energy was produced. However, despite these good results, the Spanish executive decided to make a change in policies to promote solar energy. The most important reason for this change was that the public treasury could not assume such a high cost overrun caused by the feed-in tariff system in a scenario of economic crisis. This renewable energy incentive system was widening the gap between generation costs and revenues collected through tariffs, increasing the “tariff deficit” [5]. Moreover, the policy of premiums implied an enormous transfer of public resources towards investors in photovoltaic energies, with evident discomfort from other agents in the energy market, such as the large electricity companies who claimed that the system in general was becoming more expensive due to such premiums. Therefore, in Sustainability 2020, 12, 1892 3 of 18 2012, after a succession of increasingly restrictive laws with public subsidies for photovoltaic energy, theseSustainability incentives 2020, 12 were, x FOR definitively PEER REVIEW abolished. 3 of 18 5 000 700% 600% 4 000 500% 3 000 400% 2 000 300% 200% 1 000 100% 0 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Electricity capacity (MW) Solar photovoltaic Spain Interannual variation FigureFigure 2.2. Photovoltaic solar power generated in Spain. Own elaboration with the data of [[16].16]. 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