Spain’s Solar Gamble:
Lessons in Governance from a Policy Gone Wrong

In a bright, sunlit room in Madrid, Minister of Industry and Tourism Joan Clos was reading the latest reports on Spain’s solar photovoltaic (PV) sector. Spain was witnessing a solar boom due to Royal Decree 661/2007, which offered generous feed-in tariffs (FITs) to encourage investment in solar energy. The Spanish government was aiming to become a leader in renewable energy, to reduce emissions, and to meet EU climate goals.

However, in 2008, the government of Prime Minister José Luis Rodríguez Zapatero realized that Spain’s solar PV sector had expanded far beyond expectations and was incurring unsustainable costs for the government. An industry bubble was created as investors rushed to install solar capacity. As a result, the government faced a dilemma: how to maintain Spain’s leadership in renewables without bankrupting the state. The eventual decision to cut the FITs retroactively led to a collapse of the solar PV market, financial losses, legal battles and diminished investor confidence.

This case study examines the experience of Spain’s solar PV policy from boom to bust and analyzes the gaps between the policy’s ambitious goals and its implementation. It also discusses potential steps for developing more resilient governmental frameworks for renewable energy technologies such as green hydrogen.