Spain's Solar-Power Collapse Dims Subsidy Model

Spain's solar ambitions started as an outgrowth of its earlier push to become a global player in wind power. By offering generous long-term support for wind power, Spain became a world leader. Companies such as Iberdrola SA and Gamesa Corp. catapulted from their home market to the U.S.

Wind energy was a cheaper renewable option than solar, so the Spanish government sought to make solar power more attractive by increasing subsidies, just as other countries, particularly Germany, were scaling back support.

As a result, Spain's solar capacity last year increased to 3,342 megawatts from 695 megawatts, the size of a coal plant, a year earlier. Government subsidies for solar power jumped to €1.1 billion ($1.6 billion) in 2008 from €214 million in 2007.

Solar power "was a financial product, not an energy solution," says Ignacio Sánchez Galán, chairman of Iberdrola, the world's biggest renewable-energy company. Iberdrola has largely shunned solar because wind power is cheaper and requires less land.

http://online.wsj.com/article/SB125193815050081615.html