Spain Incentivizes Renewable Energy

January 7, 2019 Jenna Bieller

As part of its annual Global Energy Outlook, Schneider Electric market analysts and sourcing professionals will share their expertise on emerging opportunities in select geographies around the globe. These market snapshots will be compiled for easy access and updated at our Perspectives Hub throughout the year.

Below David Laszlo, Energy Sourcing Manager, outlines emerging opportunities and key considerations for organizations with facilities in Spain.

Market History

In the span of two decades – 1997 to 2018 – Spain accelerated from starting the liberalization of its electric power market to setting an ambitious goal to achieve 100% renewable electricity by 2050. Currently, Spain is a net importer of electric power, primarily from France and Portugal. Nuclear, wind and hydro are the main elements in its generation mix.

Except for the transmission network, Spain’s supply chain is dominated by Endesa and Iberdrola. The sum of their retail market share is nearly 50%, which contributes to a moderate market concentration. OMIP is Spain’s market operator and offers futures, swaps, forwards and options. As of now, prices are published 5 years ahead.

Emerging Opportunities for Corporates

Conventional supply agreements continue to attain greater flexibility, either via stand-alone agreements or Risk Managed Portfolios (RMPs). These agreements can help organizations more easily implement a risk optimization strategy.

Power Purchase Agreements (PPAs) also represent an emerging (and, not to mention, cost-effective) opportunity. Last fall, Spain’s government proposed measures to incentivize renewable energy generation, such as:

  • Temporarily suspending the electricity tax applicable to power generation
  • Moving part of the electric power contracted in wholesale markets into long-term bilateral agreements (e.g., PPAs)
  • Encouraging on-site generation

Although these measures were primarily introduced to tame the recently elevated wholesale prices, they certainly create room for corporate PPAs, both direct/sleeved (DPPA) and virtual/synthetic (VPPA).

Key Considerations

There are two primary considerations for organizations with facilities in Spain:

  1. Achieving Sustainability Targets
    Several choices are available to an organization in its efforts to achieve its sustainability targets, including accepting green tariffs, sleeving DPPAs into conventional Supply Agreements, negotiating VPPAs or installing onsite assets. One important note: in Spain, Energy Attribute Certificates (EACs) sourced outside of Spain can be redeemed only by the retail supplier, making the unbundled procurement of Spanish EACs challenging.
  2. Leveraging Energy Intensity
    For energy-intensive organizations, two schemes – one existing and one emerging – can provide opportunity. The first is an Auction for Interruptible Demand, which brings companies financial compensation in exchange for their ability to interrupt their facilities’ energy supply. (Also called Demand Response in other geographies.) The second is the Energy Intensive Consumers Statute, which is designed to support energy-intensive industries through financial incentives for eligible facilities.

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Our 2019 Global Energy Outlook will combine commentary on a wide range of energy market-related topics from our subject matter experts around the globe. We will release new content throughout the year in a variety of formats, all of which will be available at our Perspectives Hub. Be sure to bookmark it for easy access. You can also request contact for more information.   

 

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