As the Spanish government considers different proposals to downsize its popular solar-subsidy program, a group of solar-energy producers on Wednesday advocated keeping the current subsidies program intact.

The group, Photovoltaic Business Association (AEF), broke off from the Spanish Photovoltaic Industry Association (ASIF) last week after disagreeing with the progress ASIF had made in negotiating with the government for a new set of subsidies, or feed-in tariffs.

“The breakaway group was absolutely not happy with how ASIF has handled the negotiation and thought ASIF was willing to sacrifice big solar projects,” said Francesco D’Avack, an analyst with New Energy Finance.

The current feed-in tariffs are set to expire on Sept. 29, causing no small amount of anxiety among solar companies – from cell makers to solar-power system installers – that have made good money from the government subsidies. The program requires utilities to buy all the solar energy generated at a price higher than that of conventional power.

But companies that don’t finish installations before the deadline could now end up earning less money per kilowatt than they expected, which could wreak havoc on the project’s profitability.

The goal of feed-in tariffs is to reduce the rates over time so that solar energy prices would eventually cost about the same as conventional power.

AEF asked the government to retain the current tariffs for four years, arguing that the subsidies are necessary to achieve AEF’s goal of generating 10 gigawatts, or 5 percent of the national power output, by 2016, Reuters reported. However, that’s far higher than the government’s goal of 6 gigawatts in 2020.

The group is made up of 13 businesses, which account for 70 percent of the country’s solar industry.

This new group emerged after the government indicated that it’s considering reducing the solar energy rates by up to 35 percent and cap the capacity of 2009 installations at 300 megawatts (see Spain Could Reduce Solar Subsidies by 35%).

The proposal would set different prices for panels placed on the roofs and those on the ground. Utilities would pay 33 euro cents for each kilowatt-hour of electricity from rooftop systems and 29 euro cents for ground installations.

The current price is about 45 euro cents, depending on the size – not the location of the installations. The rate is up from 42 euro cents last year because the program allows the rate to be adjusted for inflation.

The current program went into effect last year, with a cap of 400 megawatts that included those installed in 2006. The government thought the cap wouldn’t be met until 2010.

Instead, the country already saw 344 megawatts of new installations by last September (see Is Spain Shining Too Brightly). The capacity may reach 900 megawatts or even 1 gigawatt by the end of this year, D’Avack said.

The government negotiators from the Ministry of Industry, Tourism and Commerce plan to introduce a draft proposal by July 15.

The government has been negotiating the terms of the new tariffs with the ASIF, which has advocated a capacity cap of 480 megawatts for next year.

The group also proposed a more flexible rate schedule that would allow for annual adjustment of the prices, D’Avack said. The rate changes would depend on the capacity installed – a boom year in which more is built than predicted would lead to a greater rate decline the following year, for example.

Concerned about whether it would be able to carry out planned projects quickly enough to take advantage of existing rates, the new breakaway group, AEF, plans to lobby for a better deal.

Spain modeled its program after the one in Germany, whose policy has turned the country into one of the largest solar markets in the world. The German government recently set new terms that will reduce the subsidies, but not after a contentious political battle over how much public money should be spent on supporting an already fast-growing industry (see Solar Prices Set in Germany).

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