One way to turn your economy around: Slash solar subsidies.

They weren’t the only cause of Spain’s economic doldrums, but lavish Spanish solar-energy subsidies were certainly one of the reasons. We’ve known this, and apparently Spain wised up a bit. Late last month, the Spanish government acted to atone for its solar-subsidizing sins, choosing to slash solar handouts by 30%. A good start, for sure, but given Spain’s economic woes and the fact that their subsidies have led to a solar-construction frenzy that has produced more than 6 times the solar-power capacity than the government planned for the end of 2010, Spain shouldn’t stop there.

The Wall Street Journal writes:

Spain is one of a number of cash-strapped European countries that have been forced to review their generous system of subsidies for renewable energy, in order to lower electricity bills for consumers struggling under austerity measures and public spending cuts.

Like Germany, Spain has long had feed-in tariffs, which guarantee prices for low-carbon electricity and so assure renewables companies a higher return than they could expect from the free market. They were seen as crucial if European countries were to meet tough targets for cutting greenhouse-gas emissions.

In Spain, solar-PV plants connected to the grid by September 2008 receive a feed-in tariff of €450 ($589) per megawatt hour of electricity for 25 years—roughly 10 times the price utilities pay for power produced from conventional sources such as gas and coal.

Small investors poured in to take advantage of the incentives, building huge installations of photovoltaic panels across Spain. The country now has 3,200 megawatts of solar capacity, more than six times what the government expected to have by the end of 2010. Last year alone it handed out €2.6 billion in subsidies for solar power.

2.6 billion Euro. That’s almost 3.4 billion dollars, if my online currency converter is correct. And for what? For the energy resource that is arguably the worst bang for your buck, on the basis of how often the resource produces power (a.k.a capacity factor). Last I checked, there weren’t any ticker-tape parades celebrating the U.S. economy, yet we’re still propping up small-potatoes renewables with taxpayer dollars. Throw in the fact that our economy is about to take a big one on the chin from the EPA’s new carbon-cutting measures, and I’d say that, for once, it might not be a bad idea to take a cue from the Spanish government and slash spendthrift solar subsidies.

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