Speech: Review of Spain’s energy policies

Below are highlights from a speech given by Maria van der Hoeven, IEA Executive Director at the launch of ‘Energy policies if IEA Countries – in depth Review of Spain 2015.’

“Ladies and gentlemen, the energy sector in Spain exhibits a number of strengths, notably regarding security of supply. However at the same time, the economic situation has brought new challenges, challenges that have prompted government action. This has been particularly true for the electricity sector. These actions may have served to solve one problem while creating another. They also serve to highlight one of the central challenges of Spain’s energy sector. It is operating almost as if your great country is an island. Yet it is not an island, neither literally nor figuratively. The future of energy in Spain lies in connecting itself with Europe and the world.”

Energy supply

“On energy supply, Spain is very secure. Spain’s major fuel oil is imported from a broad range of countries, and Spain also holds far more oil stocks, 131 days in April 2015, than required under its obligations as an IEA member. You also have an internationally competitive refinery sector.

“Regarding natural gas, Spain has pipelines from North Africa, France and Portugal, and plentiful LNG capacity, one third of the EU total. Gas is imported from more than 10 countries, a very high figure, and you have also limited the share of any given country as a supplier to your largest importing companies. In addition, gas storage has been enhanced and obligatory gas stocks stand at 20 days. This is all very robust. As a further step to increase gas security, we encourage Spain to assess its shale gas potential.”

“Security of energy supply has been improved as a result of both laws and regulations, but also because of significant capacity increases over the past 15 years and declining demand for primary energy and electricity during the recession. Yet what is good for security of supply may not be economically ideal. Combine increased capacity with declining demand, and what are you left with? An accumulation of tariff deficits in the electricity and natural gas systems.”

Natural gas

“Regarding natural gas, we expect LNG imports in Europe to double between now and 2020. Spain’s under utilised LNG capacity could help to increase flexibility, diversity and security in the EU internal market. For that to happen, as in electricity, more interconnection capacity with France is needed. The IEA therefore welcomes the recent decisions to expand this capacity, in particular through the MidCat project, and recognises Spain’s key role in driving this development at the EU level. We also welcome the recent work to develop and launch a gas hub. An organised gas hub would benefit Spain by providing a more transparent price reference for gas and enhancing competition.”

Climate

“Underpinning many of the topics I have spoken on thus far is, of course, climate. This is a topic that will be with us for a long time to come and I am glad to see a growing recognition across the energy sector that decisive action is needed to curb climate change. Spain’s current measures to reduce energy related CO2 emissions focus on energy efficiency and renewable energy. A lot has been done, but more is needed for Spain to reduce emissions in sectors outside the EU Emissions Trading Scheme.”

“We urge the government to consider raising tax rates in a revenue neutral way. In particular, fuel taxes are relatively low by international comparison, and raising them in a revenue natural way can encourage more efficient oil use which would deliver environmental and energy security benefits. Ambitious policies on energy efficiency bring multiple benefits beyond emissions reductions: they save money, reduce import dependence, and improve air quality. An important new funding source is the National Energy Efficiency Fund, set up in July 2014.”

Next steps

“The government should therefore prepare an integrated long term energy strategy, with a particular focus on energy demand and energy efficiency. This should be done with the long term greenhouse gas reduction objective in mind. In this context, Spain should keep all options open for low carbon power generation. This includes nuclear power, your low carbon baseload power source. You should also increase efforts to limit peak electricity demand through energy efficiency and other demand side measures. As can be seen here, oil use should merit particular attention in any plans for a transition to a low carbon energy system.

“For the long term, research and development on low carbon technologies is needed. On this point, we must acknowledge that Spain has never been a leader in R&D spending. Indeed, Spain has for many years had the second lowest R&D spending among all IEA member counties. Of course it is understandable that during the recession, the government cut spending in this area, but we urge Spain to reconsider these spending cuts as soon as possible. Consider that the less funding there is for research, the less likely it is that your best and brightest will stay in Spain, and the cycle will continue.”

“I will leave you today with some of our main recommendations. First, Spain should align short term policy objectives with long term energy goals by establishing detailed pathways and measures to achieve them. Second, remember the lessons learned from your own experience: maintain fiscal discipline and ensure investor confidence. Third, recall that all challenges can turn out to be opportunities. Continue to work closely with your neighbours and maintain your strong voice in Brussels to create the International Energy Market and help to make the Energy Union a reality.

“Ladies and gentlemen, six years from now, we will come back to see how much progress Spain has made. I am confident that the story will be even brighter than it is today.”

Edited from speech by Claira Lloyd

Published on 27/07/2015


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