Spain Government Suspending Solar Power Tax Should Be an Example for India

Government of Spain has announced plans to suspend sun tax to reduce electricity bills, which stand as the highest in Europe and continues to rise. Increasing electricity expenses in the country has reportedly led to harming business competitiveness as well as shrinking consumer’s capacity to purchase power. The removal of Sun tax, which stood at 7% previously, is expected to push more solar power into the grid, aligning perfectly with Spain’s target to get 100% renewable energy by 2050.

The Scenario and Its Expected Impact

This tax, which levied 7% duty on solar power installations with more than 10 kW capacity, witnessed controversy as seen to be affecting households and small businesses. Spain introduced this tax in 2015, cutting subsidies for renewable energy as part of the solution for economic crisis that surfaced in 2013, showcasing a 28 billion euro ($32 billion) debt. However, this tax failed to generate any revenue as the utilities passed the tax to consumers and the consumers showed hesitance in opting renewable energy at this heavy cost.

And as a result, Spain currently stands with only about 1,000 PV installations (ground and rooftop), and while other aspiring solar countries are progressing. Like- Germany has over 1 million PV plants in operation; even though Spain receives more sun light in a year than Germany. In such a scenario, this tax exemption is considered to be a decisive action taken towards energy and environmental sustainability. Removal of this tax is expected to reduce the average electricity user bills by 4% and help Government of Spain to invest in utility (large scale) solar plants to push green energy into the grid.

Spain’s decision should be considered as a positive step that can improve country’s energy scenario and should inspire other countries that are trying to phase out fossil fuel usage through green energy transition.

Solar Power Growth in India

Solar energy growth in India in recent years has been phenomenal. India became the 2nd largest solar power market in the world in terms of deployment after overtaking United States in the first half of 2018. Cumulative grid connected installed solar capacity in India stands at ~30 GW (2019). Large scale solar panels projects in the country account for 87% of solar installations, while rooftop nearly accounts for 11% installations. Rooftop solar growth has shown 72-113% y-o-y growth from 2016 to recent years. And its current installed capacity is 3 GW. In India solar power accounted for nearly 53% of new energy capacity additions in 2018.

Additionally, research shows ~40% higher installation expectancy in 2019 than 2018. Although growth is in sight, there have been road blocks that are limiting solar progress.

Lesson for India

Indian solar energy industry is expected to show better results in 2019 than 2018, which witnessed slog by many tender cancellations. However, taking hint from Spain, India immediately needs to focus on exempting solar power from taxes and duties. Solar is the most lucrative sector in the country and the only way to phase out impact and expenses ($ 125 billion in crude oil in FY 18-19) of fossil fuels. Therefore, it needs to be re-prioritized to get more investments, support and exemption from taxes or duties. If we do not follow in Spain’s footsteps to protect and adopt solar energy now, soon our solar adoption rate will slow down as well, and rising conventional energy prices will deal a damaging blow to our country and may remove us from taking aggressive measures to turn around the bleak energy scenario.

We as a country still have the chance to make the right decision. A greener, cleaner and energy rich sustainable future can still be ours, given that solar industry is given priority.