Fixed feed-in tariff versus premium: A review of the current Spanish system

Abstract

Since 1998 the Spanish Government established a feed-in system where RES-E generators could choose between two alternatives: fixed feed-in tariff and premium. Nowadays, all RES-E1 can be sold in the electricity market (getting an additional premium) except for solar photovoltaic. One important novelty established in 2007 is a cap and floor system for facilities under the premium option. The aim of this paper is to analyze and compare these two alternative options, fixed-FIT and premiums, which coexist at the same time in Spain, describe the evolution of both systems and evaluate its performance. The introduction of this support system in Spain led to very good results in terms of RES-E deployment. The main advantage of the premium option is that it is a scheme integrated in the electricity market. One disadvantage is that it can occasionally lead to overcompensation; one way to try to avoid it is to set a cap value. In order to evaluate the performance of this dual support system not only RES-E deployment has been assessed but also the policy stability, the adequacy of RES-E production to the electricity demand pattern and the changes in the investors’ behaviour.