How big was the Spanish solar market in 2008? Three times bigger than many analysts have anticipated.

Spain's National Energy Commission (CNE) this week estimated that about 3.1 gigawatts of solar power were connected to the grid from January through November 2008, said Gordon Johnson, head of the alternative energy research at Hapoalim Securities in New York City.

Since the Spanish program began, around 3.75 gigawatts have been installed there.

The 3.1-gigawatt number is an estimate, because only nearly 2 gigawatts worth of the installations have been registered with the government and connected to the grid. But the CNE expects the final number to be higher because it's still collecting registration data.

At more than 3 gigawatts, the Spanish market growth far surpassed estimates by many analysts. Many had believed the country would only add around 1 gigawatts of new capacity in 2008.

Spain became a booming market thanks to a generous government program that requires utilities to buy all the solar energy production at a premium price. The catch was that the program would be shrunk after the end of September 2008.

As a result, developers rushed to install as many energy systems as they could by the September deadline. Solar panel makers, particularly those from China, benefited tremendously from the dramatic growth.

But problems also accompanied the growth. The government had to launch investigations into allegations that some developers had committed fraud by falsely claiming to have completed their installations by the September deadline (see Solar Fraud Could Eliminate Spanish Market).

It's not clear whether CNE's latest installation estimate takes into account these fraud allegations. Travis Bradford, head of the Prometheus Institute and a Greentech Media advisor, believes the 3-gigawatt figure is too high and expects the government to revise the number to closer to 2 gigawatts.

The frenzy also led to an oversupply of panels, analysts said (see Solar a Bust In Spain). Some developers couldn't pay for the panels they ordered. The new program will only apply toward 500 megawatts worth of new installations in 2009, and the solar-electric rates to be paid by utilities are also lower than the previous year (see Spain Approves 500MW for Solar). Solar panel prices also have been falling.

The panel oversupply problem has happened elsewhere, too, Johnson said. Credit crunch and unrealistic expectations of the market demand have prompted many solar equipment companies to layoff people and cut sales and production forecast.

"We are going to have a tough time this year. I think people will have to adjust their expectations significantly this year," he said.

Tags: gordon, hapoalim, spain