Previously Puertollano was famous for coal, but recently was found another energy source – sun energy opportunities.

With generous incentives from the Spanish government to jump-start a national solar energy industry, the city aggressively set out to replace its failing coal economy by attracting solar companies, with a campaign slogan: “The Sun Moves Us.”

Soon, Puertollano, home to the Museum of the Mining Industry, became a hub of alternative energy, with two enormous solar power plants, factories making solar panels and silicon wafers, and clean energy research institutes. Half the solar power installed globally in 2008 was installed in Spain.

Farmers sold land for solar plants. Boutiques opened. And people from all over the world, seeing business opportunities, moved to the city, which had suffered 20 percent unemployment and a population exodus.

But as low-quality, poorly designed solar plants sprang up like weeds on Spain’s plateaus, Spanish officials came to realize that they would have to subsidize many of them indefinitely, and that the industry they had created might never produce efficient green energy on its own.

In September, the government abruptly changed course, cutting payments and capping solar construction. Puertollano’s brief boom went bust. Factories and stores shut, thousands of workers lost their jobs, foreign companies and banks abandoned contracts that had already been negotiated.

“We lost the opportunity to be at the vanguard of renewables — we were not only generating electricity, but also a strong economy,” said Joaquin Carlos Hermoso Murillo, Puertollano’s mayor since 2004. “Why are they limiting solar power, when the sun is unlimited?”

Puertollano’s wrenching fall points to the delicate policy calculations needed to stimulate nascent solar industries and create green jobs, and might serve as a cautionary tale for the United States, where a similar exercise is under way.

For now, electricity generation from the sun’s rays needs to be subsidized because it requires the purchase of new equipment and investment in evolving technologies. But costs are rapidly dropping. And regulators are still learning how to structure stimulus payments so that they yield a stable green industry that supports itself, rather than just costly energy and an economic flash in the pan like Spain’s.

“The industry as a whole learned a lot from what happened in Spain,” said Cassidy DeLine, who analyzes the European solar market for Emerging Energy Research, a firm based in Cambridge, Mass. She noted that other countries had since set subsidies lower and issued stricter standards for solar plants.

The most robust Spanish solar companies survived the downturn, have restructured and are re-emerging as global players.

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