Rising oil prices may be making wind power cost-competitive in Spain, but the key to Spain’s rapidly growing solar industry has been generous government subsidies creating market stability. Although nothing is definite yet, simply the mention of reducing the level at which subsidies are capped has created waves in the Iberian solar industry.

Reuters is reporting that the Spanish government is consider reducing the subsidy cap to 300 MW, less than one-third of current levels. As solar developers had been expecting a continuation of subsidy caps of 1000 MW, profit margins will be reduced and the growth of Spain’s solar industry could slow.Apparently seeing the writing on the wall, ASIF (the Spanish solar industry association) has called for a cap of 480 MW next year.

Solar power may soon be reaching parity with fossil fuels, but until that time shifting subsidy levels without adequate notice to industry will only create market uncertainty, potentially slowing installation of renewable energy at time when installations need to increase.

--photo by laurenatclemson via flickr