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Spain could use by-pass clause to fend off Moroccan power exports

Barcelona — The EU's Energy Commission has proposed Spain use a 'by-pass clause' to counteract an increase in power imports from Morocco following the start-up of a 1.4 GW coal-fired plant at Safi last December.

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A May 6 letter from Commissioner Miguel Arias Canete to Spain's Ecological Transition Minister, Teresa Ribera, said Spain's most straightforward option would be to use the mechanism outlined in the EU Treaty of the Functioning of the EU, under environmental protection norms.

Other options outlined by Canete in the letter seen by S&P Global Platts Thursday would either require a unanimous vote from all member states to approve a tax on the power imports, or a voluntary bilateral agreement between the two countries.

In February, Ribera wrote to Canete requesting information about legal mechanisms that could be employed in terms of free competition and environmental protection.

For the first quarter of the year, Spain imported 513 GWh from Morocco, compared with the 1.26 TWh exported in the opposite direction in the same period of 2018, according to investment bank RBC Europe Limited. For a full year, that could mean a swing of 7 TWh, or 3% of Spanish demand, RBC said.

The Safi plant, operated by Safiec -- which comprises France's Engie (35% stake) Nareva (35%) and Mitsui (30%)) -- was brought online on December 8. It has enough capacity to meet 25% of Morocco's power demand and holds a 30-year power purchase agreement with the National Electricity and Water Office (ONEE).

Coal-fired generation in Spain has been pushed out of the generation mix this year by gas-fired plants, largely as the result of CO2 emissions prices which penalize coal more than gas.

However, the energy imported from Morocco, which is not subject to the CO2 levy, has been able to out-compete Spanish thermal generation, especially in the wake of the jump in emissions costs in the past two years.

Spain and Morocco recently signed a memorandum of understanding regarding a third power interconnection between the two countries, boosting interconnection to 2.1 GW by 2026.

As it stands, 1.4 GW Spain-Morocco link is the only direct interconnector between Africa and Europe.

Morocco and Portugal are in advanced talks for a 1 GW interconnector between the two nations, while Italy and Tunisia last month signed an an agreement to proceed with a proposed 600 MW link joining the two countries.

-- Gianluca Baratti, newsdesk@spglobal.com

-- Edited by Dan Lalor, daniel.lalor@spglobal.com