Spain's draft clawback law 'distorts market, drives up transition costs': Eurelectric

Spain's draft carbon clawback law would distort the internal energy market and increase the cost of the energy transition, CEO of European power association Eurelectric Kristian Ruby told S&P Global Platts Aug. 13.

The government has proposed a levy on older non-CO2 emitting power plants that have benefited from rising wholesale prices, driven higher by gas and carbon costs. The proceeds would be used to cover system costs and reduce consumer bills.

"The draft is being pushed to parliament with some urgency to get it into law before the end of the year," Ruby said.

"From what we've seen it would be in direct conflict with EU law for the simple reason that it creates a distortion of the internal energy market," he said.

It also represented a fundamental attack on the principle of the polluter pays, Ruby said.

"How are you going to build a market if every time there is a price fluctuation you go and tamper with fundamental market principles?" he asked.

Spain's Ecological Transition Minister Teresa Ribera has called on the European Commission to re-open market design rules, challenging the principle of marginal pricing. The rules, agreed by all EU Member States, are only just being applied.

On addressing the issue of rising consumer prices, Ruby said the government should look at amending the regulated tariff.

Around 35% of all consumers in Spain are on a regulated tariff, equating to 10 million contracts of a total 28 million.

This tariff is known as the PVPC, or voluntary price for small customers.

"The government has linked the regulated tariff directly to the marginal price. It could decouple the tariff from wholesale prices. There's something to work with there, but it remains unexplored," Ruby said.

"A revision would help the immediate situation, while still holding to basic principles," he said.

The industry was responsible for providing a critical service to society while upholding the principles of market transparency and competition.

"What we often see, however, is that politicians quickly forget about these principles as soon as prices fluctuate," Ruby said.

The draft clawback law as it stood would only raise the overall costs of the energy transition, he said.

"It will translate into an immediate undermining of investor confidence and we know what that means – greater returns for greater risks," Ruby said.