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Spanish coal generation slumps to record low in 2019

Spanish coal demand for generation slumped to its lowest year on record in 2019, with demand at about a quarter of the previous five years' average and December recording the first coal-free generation days on record.

Total coal-fired output in Spain was 10.8 TWh in the full year, according to data from grid operator Red Electrica de Espana S.A.U., down from an annual average of 40.8 TWh between 2014 and 2018. This meant that coal supplied just 4% of national demand in the year, down from 14% in 2018 and 17% in 2017.

For December, coal-fired generation was just 400 GWh, close to all-time minimums recorded in March and August 2019, while five days — Dec. 14, Dec. 21, Dec. 22, Dec. 24 and Dec. 25 — resulted in zero coal-fired generation for the first time ever in Spain.

Plant closures

In the coming year there is likely to be an even sharper reduction as a number of coal plant closure plans were submitted in December, in addition to previously announced closures of plants supplied with domestic coal, which are due to take place at the end of June.

On Dec. 27, Endesa SA announced its intention to close two plants that were previously expected to remain operating beyond 2020 — the 1.4-GW As Pontes facility in Corunna and the 1.1-GW unit at Carboneras, Almeria — although it didn't give a date for either closure.

"The sharp change in market conditions caused by the rise in CO2 emission rights and the significant drop in the cost of gas has led these plants to lose their competitiveness for supplying the market and there is no sign of improvement," the company said.

To replace the lost output, the company said it will build 3 GW of renewables — 1.50 GW in Galicia and 1.52 GW in Andalucia — between 2020 and 2026.

Endesa was already given permission in September to shut down its 1.0-GW Compostilla and its 1.1-GW Teruel plants and is in the process of dismantling its co-owned 347-MW Anllares plant, while Spain's other large operator Naturgy Energy Group SA is due to close all three of its coal plants by June 2020 — at Meirama, Narcea and La Robla.

In the country's island territory of Majorca, Endesa has also halted coal-fired output at units 1 and 2 at its Es Murterar plant, the island's government announced Dec. 30. These have a capacity of 125 MW apiece.

The remaining units at Murterar, which are gas-fired, will be limited to 1,500 hours output a year until August 2021, whereafter operation will be limited to 500 hours a year until the full closure, which will take place after a second interconnector cable with the mainland is concluded, according to a statement from the local government.

Increased renewables capacity

Spain's drive to decarbonize its economy has seen it add around 5 GW of new renewable capacity in 2019 while increased LNG supply from the US Gulf and Russia has meant far more competitive gas prices.

These two factors have increasingly pushed coal out of the thermal gap in the generating mix, leading to a flip in the position of gas and coal in the merit order. While coal outsupplied gas roughly three to two in 2018, gas has outsupplied coal five to one in 2019, according to Red Electrica data.

Added to this, the hike in CO2 costs has meant Spain increasingly importing coal-fired generation from its African neighbor Morocco, following the startup of a 1.4-GW coal-fired unit at Safi in late 2018 and plans to increase coal-fired capacity by 2.9 GW to 5.4 GW by 2025.

Last year, the import balance between the two countries flipped for the first time ever, with Spain importing a net 770 GWh from Morocco compared with exports of 3.5 TWh in 2018 through their undersea link.

Henry Edwardes-Evans and Gianluca Baratti, who contributed to this article, are reporters with S&P Global Platts. S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.