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Spain 2030 strategy steers towards solar photovoltaic, natural gas

Spain's Commission of Experts has published a series of proposals that will be the foundation for the country's power roadmap, with a view to meeting its 2030 Paris Climate Agreement levels in terms of decarbonisation and emissions reduction.

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The commission's findings see a shift toward renewables, particularly solar photovoltaic, in terms of power generation and natural gas, particularly in the transport sector, as well as proposing new levies and market reform as means of meeting the objectives.

In its base-case scenario for 2030, the group says it sees a "decoupling" of economic growth from energy demand as the weight of natural gas and renewables, particularly PV, in final energy demand increase a the same time as oil product demand recedes.

The commission also outlined how it would look to "electrify" final demand -- that is to shift supply towards carbon-free renewables and away from emission -heavy oil products.



In the transport sector, which is the most problematic for emissions reduction, the commission sees electric vehicles and natural gas (or LNG ) as the best options, particularly for goods traffic, including maritime transport.

Such a shift could boost natural gas use to 466 TWh by 2030 -- up more than 50% from around 350 TWh at present -- making it the single greatest source of primary energy in Spain and supplying more than nuclear, gasoline, diesel, hydro and coal combined.

However, in the generating sector, solar photovoltaic would see the greatest leap, with installed capacity booming from a current 4 GW to as high as 47 GW of installed capacity, taking first place in the generating mix with 27%, followed by wind with 20% and nuclear with 16%.

This, combined with other renewables (including 8.5 GW of co-generation and 2.4 GW of battery systems) would represent almost four-fifths of the country's installed capacity by 2030, with 62% of generation from renewables and 29.7% of estimated final energy demand from renewables, according to the report.

The median cost of final energy could reach Eur165.40/MWh while the median cost of electricity generation could be Eur51/MWh, it estimates.

This would lead to Spain likely becoming a net power exporter, since its large mix of renewables would should result in a discount to neighboring markets France and Portugal.

This evolution, coupled with a base estimate of Eur50/mt for CO2 would likely spell the end for the coal sector which could, in this case, be priced out of the market.

However, the commission sees the nuclear sector extending the life of the country's plants at least up to 2030.

The commission estimates that a full nuclear closure would increase power prices around 20% and also cause a doubling of CO2 emissions in the power generating sector.

By extending the life of the country's nukes, the operators would also have an extended period in which to continue contributing to the nuclear dismantling fund, which currently holds around Eur5 billion of the estimated Eur13 billion required by 2070 to dismantle the entire fleet.

Indeed, as a further boon to the nuclear group, the document also proposes abolishing a 7% tax on generation that was applied as a temporary measure in 2012 and is still in place. The tax has been pinpointed by generating companies Iberdrola and Gas Natural as a main reason that their nuclear businesses are running at a loss and as a support on wholesale power prices.

Indeed, the commission views changes in tributary income as one of the most effective tools to help reach its objectives.

New taxes could be applied to emissions of NOx and SOx as well as CO2, with the levies made to generating plants as well as end-users of fossil fuels, it said, while the legacy costs from the renewable feed-in tariffs, amounting to more than Eur20 billion, could be spread to the whole sector rather than just the largest generators, who currently amortize the debt owed them by selling government-backed bonds.

In terms of market reform, the commission said it would like to look at reforming its design following two decades since its start.

This could start with increased flexibility and demand sensitivity to prices, particularly in periods of short supply.

The existing "rigidness" of the offer side could be improved by using markets which allow shorter times between contract and delivery into the system.

Lower offer prices from renewables could also mean a greater need for capacity mechanisms and plant hibernation legislation, it said.

--Andreas Franke, andreas.franke@spglobal.com
--Gianluca Baratti, newsdesk@spglobal.com