Spain could be considering raising the cap on its solar incentive to 2.26 gigawatts, up from a previous proposal of 1.2 gigawatts, according to a Piper Jaffray research note Thursday.

The note from Piper Jaffray analyst Jesse Pichel said the information came from a “leaked royal decree,” which also proposed a subsidy of 35 euro cents per kilowatt-hour, up from a previous proposal of 31 euro cents per kilowatt-hour. 

“If accurate, this proposal is a significant positive for the group, as it eliminates overhang and implies strong growth and pricing for modules [worldwide,]” he wrote.

In late September, Spain reached 344 of the 400 megawatts it had set as a cap on its solar subsidy, making it clear the country would reach an early end to the program, originally expected to finish in 2010 (see Is Spain Shining Too Brightly?). 

The country’s Ministry of Industry, Tourism and Trade proposed tripling the cap to 1.2 gigawatts while potentially lowering the feed-in tariff, or the price paid to generators that deliver solar energy to the grid, from 42 euro cents per kilowatt-hour to 31 euro cents.

Providing smaller subsidies, but more of them, would keep the overall cost of the program from tripling alongside the cap. The goal of most feed-in tariff programs is to decrease over time as more solar power is installed. 

And in October, Jenny Chase, a senior analyst for New Energy Finance, said project owners would still see a return on their investments at the lower rate.

But some industry insiders, including Luis Alberto Solà, a general director for Schott Ibérica, said the new 1.2-gigawatt cap would leave solar companies hanging after Spain reached that cap in less than a year.

"According to this expectation, no bank will finance any project due to the high risk of being out of the game," he said at the time.

If Spain does raise its cap to 2.26 gigawatts, it will be good news for the growing number of companies targeting that market.

“It would give the market stability to know there’s going to be that amount of demand under the [feed-in tariff],” said Greentech Media analyst Oliver Guinness. “It would potentially give the market additional assurances.”

But while a higher Spanish cap might be good for the solar industry in general, it could be bad for U.S. installers, which already are finding themselves becoming less valuable to manufacturers, according to Sunlight Electric CEO Rob Erlichman.

“Product is flowing to Spain and Germany because of the tariff and the low dollar,” he said. “If you’re a producer, that’s making it awfully attractive to sell in Germany and Spain. We haven’t seen shortages, but producers are saying, ‘Look, I’ve got to put the Spanish market ahead of the U.S.’ We’re experiencing minor delays, or if it’s not delays, a cautious approach. The level of responsiveness and the ability to commit on the part of the manufacturers is not as strong as it has been.”

Companies have said candidly that they are going to try to take full advantage of the Spanish market – the higher value of the euro and the Spanish demand, he said.

The proposal from Spain underscores the difficulty the U.S. solar industry has had in extending its incentives, which are scheduled to expire this year.

Senators Maria Cantwell, D-Wash., and John Ensign, R-Nev., on Thursday proposed another bill to extend renewable-energy tax incentives for another year (see Solar Roundup: Another Tax-Credit Proposal). The Senate previously rejected a similar bill in February (see Renewable Tax Incentives Still At Risk).

San Francisco, which has been attempting to start its own solar-incentive program, also has seen a setback.

The city has put a pilot program, expected to be the largest such municipal program in the country, on hold after San Francisco Supervisor Jake McGoldrick, chair of the city board’s budget committee, last week proposed a resolution to freeze the funds for the program (see Solar Setback in San Francisco).

The budget committee voted Wednesday to continue discussions on the issue at its next meeting, effectively again postponing the program that had been scheduled to begin Monday.

While a proposal isn’t usually enough to enact a resolution -- the Board of Supervisors would normally have to vote to freeze the funds -- the San Francisco Public Utilities Commission put the program on hold until the board could make a decision, according to the county assessor-recorder’s office.

The board is expected to vote on the proposal after the committee makes its recommendation.