From Volume 37, Issue 42 of EIR Online, Published Oct. 29, 2010

Global Economic News

Built on Hot Air, Spain's Solar Bubble Has Burst

Oct. 19 (EIRNS)—In 2007, after three years in power, Spain's socialist Prime Minister José Luis Rodríguez Zapatero succeeded in getting a "feed-in tariff" for solar-power producers passed, which paid solar plantation entrepreneurs an exorbitant EU40 cents per kilowatt hour (kwh) for electricity—about 10 times the going rate—and guaranteed that rate for a full 25 years. At that point, Spain had virtually no solar industry, but the idea was that "green jobs" would follow on the government investment.

And, lured by the free money, they did. Within the year, Zapatero's tariff had drawn over 55,000 "producers," a huge portion of whom were purely speculators. Spain, which had until then imported its solar panels, that year opened its own manufacturing plant, Isofoton, based in Madrid. That same year saw the high point of Spain's wind generation—also built on subsidies—with the country producing its own turbines, through wind-power giant Iberdrola.

However, with the government guarantee, Zapatero's Spain was on the hook for $126 billion in guaranteed subsidies, some 40 years into the future, hardly a "sustainable" business model.

The year 2007 turned out to be the high-water mark for Spanish solar "industry." Forced by budget realities, and with the additional weight of speculators, Zapatero cut the subsidy for new solar installations the next year, 2008. With subsidies cut, a chain reaction of cancelled orders, collapsing profit margins, and cancelled IPOs quickly followed. In June of this year, the government announced "plans" to cut the subsidies for all solar installations by "almost 40%," a virtual death sentence for the industry.

The rise and fall of the Spanish solar industry is documented today by Bloomberg, with explicit warnings for the U.S., Germany, and China. While the Bloomberg News story blames the downfall of the "plan" on the influx of speculators, which is, in part, true, the larger truth is the wholly "uneconomical" use of solar radiation, as it presents itself on the planet's surface. The time has come to acknowledge that nature has a much better way of utilizing sunlight, through chlorophyll, which is where the color green actually comes from.

China Starts Research on 'Super-Speed' Rail

Oct. 19 (EIRNS)—China has begun research and development on a new "super-speed" railway technology, an official with China's Ministry of Railways (MOR) said today. The new technology will increase the average speed of trains to over 310 mph, said MOR chief engineer He Huawu, at a conference held in central China's Wuhan City.

Meanwhile, the 250-310 mph high-speed railway technology is in its final phase of development, and the 235 mph trains are already coming off production lines, he added.

To go beyond the "super-speed" railroad technology, maglev is required. China's maglev route connecting the Shanghai Airport with the city has been in operation from before the opening of the greatly successful Shanghai Expo. Total attendance for the Expo, which closes Oct. 30, should top 70 million people. While comparatively few of the attendees have experienced the maglev, a significant proportion of the world's elite have made it to Shanghai for the Expo and have ridden the next generation of guided transportation.

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