An Irrational Pro-Renewables Policy: Harming Spain's Economic Recovery?
Spain’s electrical supply industry is caught in a decade long death spiral of failed energy policy, over-reliance on imported fuels, and massive debt. Their new taxes on nuclear energy, an attempt to reduce utility debt, are likely to worsen their economy.
Spain imports fuel for about 51% of their electricity production in the form of coal and natural gas. Payments for these imported commodities contribute to a debilitating trade imbalance. Nuclear energy makes up the lion’s share (47%) of Spain’s domestic energy production. Their eight nuclear energy facilities add tens of thousands of jobs and billions of euros per year to the national economy while reducing the need for imported coal or gas. At the same time Spain’s nuclear plants provide reliable, predictable energy without greenhouse gas emissions.
The amount of renewable energy generated in Spain has increased considerably over the last several years. In fact, in 2012 wind energy production exceeded nuclear energy production for brief periods when demand was low, some nuclear plants were out of service, and wind conditions were nearly optimal. Unfortunately, Spain’s methods of encouraging investment in renewables have contributed to their current financial crises. The Spanish electricity industry is carrying $32 billion of debt, putting serious strain on an already faltering economy.
Spain began deregulating their electricity supply system in the late 1990′s. Their approach was eerily similar to the failed California experiment; they removed price controls to allow power generators to compete among themselves, but they limited rates paid by customers. As wholesale energy prices rose utilities were unable to recover the higher costs through higher rates to customers. The result was predictable: electric utilities began loosing money on a grand scale. Since 2005 annual “energy deficits” have been in the billions of euros per year. With slight-of-hand economics, the Spanish government allowed utilities to “bank” their annual deficits against future earnings. Unfortunately those future earnings never materialized and deficits ballooned.
A the same time Spain (like California) began a heavily subsidized renewable energy program that included “feed-in tariffs” which guaranteed wind and solar generators above market prices for all of the energy they could produce. Consequently utilities were forced to buy wind and solar energy at inflated rates, but were not allowed to recover the costs because of those same price controls. Solar and wind energy investors raked in billions of euros per year while the utility deficit grew even faster. By some accounts electric utility debt in Spain now stands at $32 billion.
These out-of-whack energy policies cost Spanish workers dearly; for every renewable energy job created more than five existing jobs were lost and unemployment soared to over 20%. According to the Canada Free Press:
For each megawatt of wind energy installed, 4.27 jobs were lost, and for each megawatt of solar energy installed, 12.7 jobs were lost.
Eventually it became clear the Spanish government would have to act to curtail the exploding debt and rescue the utilities from bankruptcy. Earlier this year they stopped granting requests for new feed-in tariffs. Beginning in January 2013 they’re implementing a new 6% flat tax on all electricity production. In addition, they’ve singled out nuclear energy for “special” taxes they are calling a “nuclear waste generation and storage tax.”
Let’s get this straight: Spain’s national energy policies enriched wind and solar energy investors while bankrupting utilities and contributing to massive job losses. Now they’re calling on nuclear energy operators, their largest source of domestic energy to foot the bill! Not only is this course of action irrational and unfair, it punishes the domestic energy production and job creation they desperately need and it perpetuates favoritism for expensive renewables that created the problem in the first place.
The first victim has already fallen to the anti-nuclear tax; the Santa María de Garoña nuclear plant is being forced out of business. Garoña is a 446 MW BWR that began commercial operation in 1971. The plant’s owner says the new 153 million euro tax that will go into effect in January is more than ten times the plant’s annual profit. They have no choice but to shut the plant down for the last time on Sunday, December 23. Hundreds of jobs will be lost at the plant and in surrounding communities. Since Garoña provides about 1.4% of Spain’s electricity, utilities will be forced to import more coal and natural gas to make up for lost base load generation.
With lost jobs, lost revenues, and rising energy imports Spain’s energy death spiral continues.
Mis oraciones por mis amigos de Garoña. Buena suerte en el Año Nuevo, y le deseo todo lo major.