Self-consumption and COVID-19

Everything was ready to give space to photovoltaic self-consumption in Spain before the coronavirus crisis. We had an improvement in law, first with the elimination of the tax on the sun, in October 2018 and then with Royal Decree 244/2019, of April 5. The latter allowed the economic compensation of surplus clean energy discharged to the grid through net billing and opened the door to shared self-consumption. On the other hand, we saw a relevant drop in the price of the facilities. In Spain, the amortization period of the investment in self-consumption is around 6 years with an average cost close to 7,000 euros, according to Soty Solar, although it varies according to the type of user that goes from companies to neighboring communities. For example, in the case of domestic consumers, the prototype of panels that are installed in homes has an average size of 4.3 kilowatts (KW), and costs around 5,500 euros, an investment that is recovered in about 7 years according to Holaluz .

All this led to an increase of more than 400 MW since 2015 in new installed photovoltaic self-consumption power in Spain. According to the UNEF report on the photovoltaic sector in 2019, the growth figures were very positive, supporting the theory that solar self-consumption can be one of the growth levers of the Spanish economy. To get an idea, according to UNEF, in 2019 459 megawatts of photovoltaic solar self-consumption were installed, whose investment represented an amount of 550 million euros. This translated into at least 734,400 hours of direct installation work.

STAND BY

However, COVID-19 did not leave the photovoltaic sector indifferent, especially during the stoppage of activity that occurred in the weeks of confinement. The new situation put an end to the forecasts that UNEF had that 600 MW would be put in in 2020. Covid-19 has caused a situation of economic uncertainty in many companies that generated some reluctance when facing an initial investment in photovoltaic energy.

Of the 459 megawatts (MW) that were installed last year, 75% was made in small and medium-sized industries, badly damaged in the short term by the virus. Right now, theire priority is not self-consumption but their own business. This has meant that many contracts that were about to be signed have been postponed and even broken. The bureaucracy is also playing its role. There are still many municipalities and public institutions that put obstacles when it comes to granting self-consumption licenses or allowing the installation of solar panels.

SURVIVORS

However, a clear trend in the sector that has followed its course after the period of confinement is perceived from the UNEF photovoltaic employer: the emergence of domestic self-consumption.

According to the Red Eléctrica de España (REE) website, and with data as of June 30, the economic slowdown caused by the health crisis has not excessively slowed down the trend of recent months after the so-called ‘sun tax’ was abolished. REE indicates an intense rise in requests, with the majority of self-consumers requesting to connect to the system to reduce their bills thanks to their surpluses and whose requests in this field represent hundreds of files nationwide that total 2,242 MW per year, 927 MW more than at the end of February, days before the confinement.

At this post-COVID moment, the interest in self-consumption in the residential field is due to, on one hand, a user profile that has had the opportunity to save and inform themselves better, during this period of confinement. On the other hand, the tax benefits that are being given by local and regional administrations are becoming a strong point in decision-making, such as:

• At the regional level, and to promote photovoltaic self-consumption in private homes, neighborhood communities, public administrations and companies, different subsidies are offered to finance renewable energy projects that differ between the autonomous communities. For example, for the implantation of solar panels Castilla la Mancha announced in July a budget of 900,000 euros for aid for self-consumption of energy for homes. In this case, the investment that the individual will have to address to qualify for these grants must exceed 3,000 euros. The beneficiaries are obliged to maintain the facility for a minimum period of three years “and, in any case – reports the regional government -, the costs of labor or execution of civil works will be eligible for up to 30 percent of the investment , with a limit of 6,000 euros ”.
• In the field of local administration, some municipalities offer tax breaks on IBI and ICIO for those who implement solar systems. The ICIO is local, it is paid at the time of requesting a building license in a unique way and its tax rate is usually around 4%, although it is variable depending on the municipality and is applied on the executive cost of the installation. This bonus on the ICIO can reach 95% in some municipalities.

Besides, there are more and more innovative offers to carry out the installation of self-consumption, even reaching initial investments at almost 0 cost by the consumer for rental panels or even offers in subscription mode without entry or permanence due to cancellation.

HELP

The increase in requests from residential does not represent the level in MW of installed photovoltaic power that the companies supposed. A situation that worries the sector since it is feared that the pandemic will break everything previously built around the activity. An activity that allowed a direct contribution to the Spanish GDP of 0.26% (3,220 M €) and employed a total of 58,699 national workers, between direct, indirect, and induced employment in 2019.

Letting the sector suffer the consequences of the pandemic would be counterproductive in a country with the highest ratio of sunshine hours in Europe 2,588.73 hours of sunshine per year). Not only that, it would be a step backwards to comply with the objectives of the National Integrated Climate and Energy Plan (PNIEC). PNIEC stablish the need to installed power in the electricity sector of 157 gigawatts (GW), of which 37 GW will be photovoltaic solar energy by 2030.

To avoid missing the train, the sector is asking for a reactivation plan and far-reaching reforms to mitigate the effects of COVID-19. On a temporary basis, it is requested that companies that want to install self-consumption can have flexibility in the amortization of the initial expense and apply a reduced VAT to those who become domestic self-consumers. On a more fixed basis, it is requested:

• Discounts on the IBI in all municipalities.
• Redesign of the electricity bill reducing the weight of the fixed term, so that consumers can see the savings from self-consumption reflected in their bill.
• Simplify, standardize and digitize administrative procedures at the regional level, eliminating the requirement of a building license and replacing it with prior communication.
• Reform the Horizontal Property Law to facilitate the realization of collective self-consumption facilities.

It is important to bet and give aid to the photovoltaic sector because, not only has it proven to be an engine of recovery for the Spanish economy in these COVID crisis, but because it is an axis that allows us to contribute to the ecological transition. The sector already has some challenges ahead to face, such as the reduction in costs of battery storage systems or the progress regarding the non-manageability of renewable energies, it does not need COVID-19 to be another one.

Marta Merodio | Energy Consultant