 
 Lourdes Segade for The New York Times
 Eusebio Sáez Mozos, a farmer from El Villar, Spain,  near Puertollano, sold a piece of land that was used for a solar  installation during Spain’s solar industry boom. More  Photos »
From The Green Inc blog on the New York Times
      PUERTOLLANO, Spain — Two years ago, this gritty mining city hosted  a  brief 21st-century gold rush. Long famous for coal, Puertollano  discovered another energy source it had overlooked: the relentless,  scorching sun    
  
  
 
Armed with generous incentives from the Spanish government to jump-start  a national 
solar energy industry, the  city set out to replace its failing coal economy by attracting solar  companies, with a campaign slogan: “The Sun Moves Us.”  
 Soon, Puertollano, home to the Museum of the  Mining Industry, had two enormous solar power plants, factories  making solar panels and silicon wafers, and clean energy research  institutes. Half the solar power installed globally in 2008 was  installed in Spain.  
 Farmers sold land for solar plants. Boutiques opened. And people from  all over the world, seeing business opportunities, moved to the city,  which had suffered from 20 percent unemployment and a population exodus.   
 But as low-quality, poorly designed solar plants sprang up on Spain’s  plateaus, Spanish officials came to realize that they would have to  subsidize many of them indefinitely, and that the industry they had  created might never produce efficient green energy on its own.  
 In September the government abruptly changed course, cutting payments  and capping solar construction. Puertollano’s brief boom turned bust.  Factories and stores shut, thousands of workers lost jobs, foreign  companies and banks abandoned contracts that had already been  negotiated.  
 “We lost the opportunity to be at the vanguard of renewables — we were  not only generating electricity, but also a strong economy,” said  Joaquín Carlos Hermoso Murillo, Puertollano’s mayor since 2004. “Why are  they limiting solar power, when the sun is unlimited?”  
 Puertollano’s wrenching fall points to the delicate policy calculations  needed to stimulate nascent solar industries and create green jobs, and  might serve as a cautionary tale for the United States, where a similar  exercise is now under way.  
 For now, electricity generation from the sun’s rays needs to be  subsidized because it requires the purchase of new equipment and  investment in evolving technologies. But costs are rapidly dropping. And  regulators are still learning how to structure stimulus payments so  that they yield a stable green industry that supports itself, rather  than just costly energy and an economic flash in the  pan like Spain’s.  
 “The industry as a whole learned a lot from what happened in Spain,”  said Cassidy DeLine, who analyzes the European solar market for Emerging  Energy Research, a firm based in Cambridge, Mass. She noted that  other countries had since set subsidies lower and issued stricter  standards for solar plants.  
 Yet, despite the pain that Spain’s incentives ended up causing, in many  ways they fulfilled their promise, Ms. DeLine said.  
 “Even though incentives can create bubbles and bursts, without them this  industry won’t take off,” she said. “The U.S. is really behind Europe  on this, and if we wait until solar is cost-competitive on its own, we  may miss the boat and an opportunity to shape the market.”  
 The most robust Spanish solar companies survived the downturn, have  restructured and are re-emerging as global players.  
 For example, when the government changed course,  Siliken  Renewable Energy, originally a producer of solar panels, shut its  factories for five months and cut its staff to 600 from 1,200. But after  shifting its focus to external markets like Italy, France and the  United States, and diversifying into solar support services, the company  now turns a profit.  
 “We were a company that banks trusted, so we could make the shift,” said  Antonio Navarro, a company spokesman. “But a lot of little companies  disappeared.”  
 The period was particularly difficult because it coincided with the  global economic crisis, he said.  
 To encourage development of solar power and reduce dependence on fossil  fuels, Europe has generally relied on so-called feed-in tariffs,  through which governments pay a hefty premium for electricity from  renewable resources. Regulators in the United States have favored less  direct incentives like requiring municipalities to buy a percentage of  their electricity from companies making renewable energy, although a few  cities and states, most notably Vermont, are experimenting with the  feed-in concept.  
 When it was announced in the summer of 2007, Spain’s premium payment for  solar power was the most generous anywhere — 58 cents per kilowatt-hour  — with few strings attached.  
 In retrospect it was far too high. “Everyone from all over the world was  installing in Spain as fast as they could, and every biologist who  could add was working in solar,” said Pedro Banda, director general of  the Institute  of Concentration Photovoltaic Systems, one of the research  institutes in Puertollano.  
 Even inefficient, poorly designed plants could make a profit, and  speculation in solar building permits was common.  
 Although Spain’s long-term goal had been to produce 400 megawatts of  electricity from solar panels by 2010, it reached that milestone by the  end of 2007.  
 In 2008 the nation connected 2.5 gigawatts of solar power  into its grid, more than quintupling its previous capacity and  making it second to Germany, the world leader. But many of the hastily  opened plants offered no hope of being cost-competitive with  conventional power, being poorly designed or located where sunshine was  inadequate, for example.  
 Designs for solar power plants vary. The most common type uses  photovoltaic panels to generate electricity. Others, called thermal solar plants, use mirrors to focus the sun’s  energy on a liquid that, when heated, drives a steam turbine.  
 In its haste to create a solar industry, Spain made some  miscalculations: solar plants can be set up so quickly and easily that  the rush into the industry was much faster than anticipated. And the  lavish subsidies inflated Spanish solar installation costs at a time  when they were rapidly decreasing elsewhere — in part because of  increasing competition from panel makers in China, but also because  higher volumes produced economies of scale.  
 In Spain, the tariff, now adjusted quarterly, is about 39 cents per  kilowatt-hour for electricity from freestanding solar power plants, and  slightly higher for panels on rooftops.  
 Germany’s tariff, 53 cents per kilowatt-hour, is expected to fall at least 15 percent this  summer, and there are proposals before Parliament to eliminate  subsidies for solar plants on farmland.  
 The bonus payments required to make solar energy financially viable  vary, depending on local sunshine and the cost of conventional energy.  Experts predict that, possibly by next year, Italy will be the first  place where solar-generated electricity will not need subsidies to  compete with electricity from fossil fuel. Italy has abundant sun and  sky-high energy rates, given that it imports most of its fossil fuel.  
 Even with the reduced incentives and local economic downturn, the solar  industry gave Puertollano something of a face-lift and, potentially, a  new economic future. Research institutes there are developing  cutting-edge technologies. Unemployment, though now up around 10  percent, has not returned to the 20 percent figure. The city is home to a  number of solar businesses: a new 50-megawatt thermal-solar plant owned by  the Spanish energy giant Iberdrola created hundreds of jobs.  
 Although coal mines still dot the landscape and a petrochemical factory  remains one of Puertollano’s largest employers, that new solar plant  sits just next door, with more than 100,000 parabolic mirrors in neat  rows on about 400 acres of former farmland. Clean and white as a  hospital ward, it silently turns sunshine into Spanish electricity.