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The dangers of renewables in Spain: speculating on grid access, importing energy from France and Morocco and the 7% tax

So far in 2019, 1,830 MW of photovoltaic power and 1,315 MW of wind power have been added to the electricity market, which represents a new renewable power that has been a determining factor in lowering the price of light. “This year we will end up with a price that will be around 49 euros/MWh when in January it was 61 euros/MWh”, informed Carmen Becerril, president of OMEL/OMI, during the III National Congress of Renewables organized by the Renewable APPA, “the integration of renewables is being done in a quite moderate way”.

04/12/2019

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“The renewables are lowering the price of the electricity market but it has been for two added phenomena: the excess of gas in the world (the slowdown of the Asian economy has much to do with it) and the emergence of a CO2 tax that has driven coal out of the market because in a year it has risen to 25 euros,” said the CEO of Acciona Energy, Rafael Mateo, “and if it continues up to 40 euros will also help to make the gas disappear, he will take it out of office for purely market reasons.

Also the fall in the price of electricity has had to do with low demand, especially in the electrointensive industry, and because “we are importing energy from France that does not pay the 7% tax and punctually from Morocco that not only does not pay the same tax but also does not pay the 25 euros of the price of CO2. For this reason, Mateo has called for an “urgent” tax reform so that companies in those countries from which Spain buys electricity, also Portugal, pay the 7% tax levied on production.

Mateo has defined this situation as “a kind of dumping” or lower prices to eliminate competition and has asked the government to harmonize this tax for being “indiscriminate” and to “redirect tax pressure to the chimneys, because it does not contribute to the goal of more renewables and fewer chimneys.

“It is necessary a balance in the conditions of sale of energy and anomalies can alter it, as is the case in Spain in previous years by issues practically linked to the deficit,” replied Becerril, “we must be able to compete with our surrounding countries on equal terms as importers and exporters, so there are taxes that no longer make sense to continue having them.

Spain will not meet its 2020 targets

Spain is not expected to meet the target of 20% renewables on January 1, 2020 despite the growth of recent months, and is that for Maria Fernandez, vice president of the CNMC, the installation of renewable energy production plants will become “more patent” in Spain from 2021 and 2022.

There is no doubt that the electricity market is moving towards a renewable model. “And this market has to become the main element of flexibility, because batteries will still take time to arrive, and we need an intermediate element: the market”.

Precisely this flexibility in the energy mix will have a lot to do with the forthcoming auctions of renewables which, according to the head of the Regulation Room of the CNMC, “we will wait to see the proposal” of the Executive, although she has pointed out that the auctions must be “ordered and planned by space, by geographical location and by type of technology”.

“The auctions will make it possible to plan the behaviour of electricity generation throughout the day and on the load curve”, he added, and for this reason they must be “flexible, neither fixed nor very transparent, in order to avoid strategic behaviour” on the part of the companies, and therefore the modification that the Government in office intends to introduce into the criteria for access to the auctions “has a complicated design”.

With regard to the regulations prepared by the Government on hybridization, which is the combination of various technologies to obtain renewable energy in the same space, Maria Fernandez announced that “could have a solution in the coming weeks.

Speculation at access and connection points

Another hot topic due to its lack of regulation is that of access and connection points. According to Acciona’s CEO, there is hyperinflation in access requests, which he has defined as “a bubble”, and has stressed that “we will have to put order as is already being done by Red Eléctrica”.

“In my opinion, renewables should not be so regulated so that there is rhythm in their development and PNIEC objectives can be met”, Ignacio Colmenares, president of Ence has pointed out, “and in the case of requests for access and connection it would also be good for there to be several agents, more investors who assume the risk of building, more experts who know the administrative procedures, and because the price must be a vector to decarbonize the economy”.

“We cannot be saying that there is movement of agents selling and buying access rights and then ask for auctions, because speculative prices will end up affecting auction prices and that will be transferred in the medium and long term to the final consumer,” concluded Carmen Becerril.

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