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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's Domestic and Imported Sources of Electricity (2011)

Spain’s Domestic and Imported Sources of Electricity (2011)

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.

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Alain Verbeke's picture
Alain Verbeke on December 20, 2012

What a tendencious article full of mistakes :

" Garoña is a 446 MW BWR that began commercial operation in 1971. "

Thank god they are retiring such an old nuclear plant...

 

" Unfortunately, Spain’s methods of encouraging investment in renewables have contributed to their current financial crises. Spain’s national energy policies enriched wind and solar energy investors while bankrupting utilities and contributing to massive job losses. "

 

http://www.windpowermonthly.com/go/windalert/article/1154787/?DCMP=EMC-CONWindpowerWeekly

 

Wind cheaper than gas, says E&Y

 

Michael McGovern, Windpower Monthly, 15 October 2012

 

The net cost of European wind power is up to 50% lower than that of its main conventional power rival, combined cycle gas (CCGT), according to a comparative study by financial group Ernst & Young (E&Y).

 

In Spain, the costs required to produce 1MWh will generate Eur56 of gross added value from wind, as opposed to Eur16 from CCGT, says the study.

 

Gas is costlier in countries dependent on imports. But even in gas producing UK, E&Y places wind's net cost only slightly above gas, at Eur35/MWh against Eur31/MWh, respectively.
Across the six European focus countries (Spain, UK, France, Germany, Portugal and Poland), wind's net cost is competitive and, extrapolated across the UE26, cheaper.

By factoring in returns to GDP, like jobs and local taxes, E&Y's analysis challenges the power sector's levelised cost of energy (LCOE) standard, which always places wind costs higher, mainly due to upfront costs.


" Their eight nuclear energy facilities add tens of thousands of jobs and billions of euros per year to the national economy "

Provide your sources to prove your statement. I think the opposite is true, those written off old plants are not adding tens of thousands of jobs to the economy, since they are already built, are written of, only needing some maintenance, while being fully automated.


" Eventually it became clear the Spanish government would have to act to curtail the exploding debt and rescue the utilities from bankruptcy. "

Well, the spanish governement did nothing to help utilities since this is a free energy market, instead Endesa got bought out by Italy's Enel utility, problem solved for the Spanish government.


" 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. "

What do you know about that ? Are you in the board room of the utilities ? On what basis did you come to this conclusion ? Can it be that through EU imposed energy savings, they won't need this plant anyhow for the next decade ?

 

http://europa.eu/rapid/pressReleasesAction.do?reference=IP/09/1733&format=HTML&aged=0&language=en&guiLanguage=en

 

Brussels, 18 November 2009. The agreement will strengthen the building codes and energy performance requirements for buildings across the EU and fixes 2020 as deadline for all new buildings to be nearly zero energy buildings. Buildings are responsible for 40% of energy consumption and 36% of EU CO2 emissions. It is estimated that, by strengthening the provisions of the Directive on energy performance, the EU could achieve a reduction in its greenhouse gas emissions equivalent to 70% of the current EU Kyoto target. In addition to this, these improvements could save citizens around Euro 300 per annum per household in their energy bills, while boosting the construction and building renovation industry in Europe.

 

 

 

http://www.ree.es/ingles/sala_prensa/web/notas_detalle.aspx?id_nota=180

https://demanda.ree.es/demanda.html

http://www.windpowermonthly.com/go/windalert/article/1059397/?DCMP=EMC-CONWindpowerWeekly

http://www.renewableenergyworld.com/rea/news/article/2011/01/spain-generated-3-of-its-electricity-from-solar-in-2010#readercomments

31 March 2011 - Spain's central government objective for renewables to cover 40% of total electricity supply by 2020 is achieved in 2010. Red Electrica reported that in the first quarter of 2011, the renewable technologies covered 40.5 percent of the demand, a little less than in the same period in 2010 when it reached 44 percent.

In March 2011, 57.9% of Spain’s electricity was generated by technologies which do not emit CO2, and wind power energy was the technology with the largest production of electricity. Spain generated nearly 3 percent or 6.7 TWh of its electricity from solar energy, wind turbines generated 21 percent or 55 TWh, and hydroelectricity's share was 17 percent or 44 TWh.

The new renewables of wind and solar in combination provided nearly 24 percent of supply. Together both new and conventional renewables delivered 40.5 percent of Spain's electricity. Cogeneration (15 percent), natural gas CCGT (17 percent), coal (13 percent) and nuclear (19 percent) provided most of the rest.

Spain's climate, geography, and population are similar to that of California. Spain's 46 million inhabitants consume some 260 TWh per year. California's 37 million people consume about 300 TWh per year. However, wind energy generates less than 6 TWh per year and solar less than 1 TWh per year in California. Together wind and solar provide only 2 percent of California's electricity.

 

John Wheeler's picture
John Wheeler on December 20, 2012

Alain, so many things to reply on, but I'll pick a few:

Many nuclear plants similar to Garona have been licensed to operate for 60 years, so at 41 the plant is far from "old".

I would hardly trust financial claims by industry trade publications. If wind were cost effective without government subsidies then why have new projects gound to a halt since Spain stopped issuing new feed in tarrifs?

Every nuclear plant unit employs between 800 and 1000 full time employees.  In addition, local skilled labor works to supplement full time staff for projects and during refuelling outages. Then there are jobs in local and regional businesses that provide materials, supplies, and parts. Finally there jobs created by the increase in economic activity in the communities around the plants when the plant workers spend their earnings.  The eight nuclear plants easily produce tens of thousands of direct and indirect jobs.

Why will the loss of Garona's 446 megawatts result in an increase in coal or gas imports? Because Spain has no choice - nuclear is base load / always on energy that can not be replaced by renewables. They have to get the new base load energy somewhere.

Actually they do have a choice - their other option is to let the grid go dark when the wind isn't blowing or the sun is not shining.