Published online 19 December 2008 | Nature | doi:10.1038/news.2008.1326

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Spanish solar firms accused of fraud

Hundreds of companies falsely registered to receive higher subsidies.

solar panelAlmost 4,200 photovoltaic installations in Spain are not producing the power they have promised.Getty

Many of the solar parks that stretch across vast tracts of the Spanish countryside are guilty of fraud, Spain's National Energy Commission (CNE) has found.

In the past two years, Spain's solar industry has grown by a spectacular 900%. The country now has the third largest solar capacity in the world, behind the United States and Germany.

But an ongoing investigation by Spanish authorities has so far unearthed nearly 4,200 photovoltaic installations that were falsely registered as being online by a 30 September deadline in order to receive higher levels of subsidy from power companies. According to the CNE report, however, none of the questionable installations, which are located in 1,447 or 13.3% of the country's solar parks, is actually producing any power.

Spain's Photovoltaic Industry Association (ASIF) has cautioned that not all of the 4,200 suspect installations are necessarily guilty of fraud. "We can talk about three kinds of installations that have received subsidies," says ASIF spokesperson Tomás Díaz. "Those that are 'in the light' — that is, they're producing; those that are 'in the shade', which means they are finished but are not connected yet; and those that are 'in the dark', which aren't finished. The ones that are in the dark are fraudulent, and they should be punished. But some of the ones in the shade aren't online because the local infrastructure isn't ready for them."

Firms rushed to register after the Spanish government agreed in July to reduce its 'feed-in' tariffs for solar panels not operational before 30 September. Under the scheme, companies failing to register active installations before the deadline would receive €320 ($460) per megawatt-hour of capacity for 25 years compared with the original €450 for companies that did. The government also made moves to cap the subsidies by declaring that it would only subsidize a total of 500 megawatts of new installations.

Many solar companies — both fraudlulent and legitimate — have also taken advantage of another loophole in the law. This allows installations to be divided into many smaller units, each of which is eligible for subsidy, explains Francesco d'Avack, an analyst at New Energy Finance in London. "It made it so incredibly profitable," he says.

Cashing in

The boom in the solar sector has coincided with the bursting of Spain's real-estate bubble.

With the state assuring returns of at least 12% over the next 25 years for solar installations, developers have continued to buy up rural lands, only instead of filling them with cookie-cutter housing, they have laid down rows and rows of photovoltaic panels.

"It's true that the real-estate sector has entered the solar industry," says Díaz. "In some cases, it makes sense — most solar panels are going to go on rooftops, and that means involving construction companies. But there are also speculators."

Spain's real-estate industry has a long history of paying kickbacks to officials who ignore zoning laws or grant preferential treatment. Already there are signs that some of the same practices have crept into the solar sector. Earlier this year, six functionaries in the provincial government of Castilla y León resigned after evidence emerged that they had granted installation permits to family members.

"You see a lot of the same practices," says Luis García, of OpciónDos, a company that specializes in urban photovoltaic installations. "Anyone can buy a point-of-connection permit and start receiving payments. It's a piece of paper, it's smoke."

Cleaning up

Among industry analysts, there is concern that the fraudulent installations will effectively use up the government's 500-megawatt cap for 2009. Although a spokesperson at CNE said that those found guilty of fraud will not be eligible for subsidies on their installations if they come online next year, d'Avack worries that another loophole in the law could unfairly allow these firms to benefit.

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"There's a provision in the law that says that if you have the paperwork complete, you'd have significant priority in the next round," he says. "We're going to see the pipe already clogged with those trying to get in under the old feed-in tariff."

That prediction seems to have been accurate. On 17 December, the Industry, Tourism and Commerce ministry announced it would postpone the January award of tariffs to new installations until 1 March. The reason, according to the ministry, was "the elevated number of applications presented". 

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