The Impact of Policy on the Efficiency of Solar Energy Plants in Spain: A Production-Frontier Analysis

The analysis of the impact of remuneration schemes for renewable electricity, and solar photovoltaics (PV) in particular, on the effectiveness of renewable energy deployment and the total costs of support has received a considerable attention in the past. In contrast, the literature on the effects of deployment support on productive efficiency and, more specifically, on the incentives to locate the plants in the sites with the best renewable energy resources is tiny. This article covers this gap in the literature. Its aim is to identify the impact of successive feed-in tariff (FIT) reforms on the location of solar PV plants in Spain between 2009 and 2013 using a unique dataset of PV plants and a panel stochastic production-frontier model. The analysis shows that more generous FITs, i.e. those providing a higher net support (support levels minus generation costs) have not encouraged the location of those plants in the best sites. Our results suggest that the design elements in instruments to support the deployment of renewable energy projects should carefully be chosen in order to encourage the selection of the best sites.