The IEA asks Spain to increase taxes on fossil fuels

The International Energy Agency (IEA) believes that Spain would have to increase taxes on fossil fuels so that final consumers pay the real costs of polluting emissions and thus renewables and electrification can be more competitive.

In a report on Spain published on Wednesday, the IEA insists that Spain has to strengthen its interconnections with France and pay attention to combined cycle power plants, which are powered by gas, so that they do not close, because they will be fundamental during the transition while coal and nuclear disappear.

Its CEO, Fatih Birol, highlights that “Spain has large renewable energy resources that can lead the transformation of its energy system and help achieve its ambitious goals”, in particular carbon neutrality by 2050.

Birol stresses that the foundations for this transformation have to be laid this decade and that the economic recovery plans, including the European funds it must receive, offer “an important opportunity” for these next three years.

The authors of the study note “considerable progress” in the decarbonisation of the electricity sector, in which renewables have increased their share from 33% in 2010 to 44% in 2020.

They also welcome the fact that the problem that had been dragging on with the tariff deficit (which was one of the black spots pointed out in the last report, in 2015), has been solved, which has allowed investments to grow again in 2019.

HEAVY DEPENDENCE ON FOSSIL FUELS

But the problem is that the Spanish energy system is still heavily dominated by fossil fuels, particularly in transport, industry and buildings, where it is far from the goals of renewables and decarbonization.

This dominance of fossil fuels has as an added consequence the high degree of energy dependence that Spain has from abroad, 73% of the total.

So that electricity – where renewables will be dominant – can be more competitive against fossil fuels and its use can be extended to new sectors, the agency is committed to changes in taxation and to tax emissions of carbon dioxide (CO2), the main greenhouse gas.

PREVENT GAS PLANTS FROM SHUTTING DOWN

It also emphasizes, paradoxical as it may seem, that it is necessary to avoid closing the combined cycle plants that burn gas (fossil fuel, although less polluting than coal or oil), which account for a third, because they have a “crucial” character during the transition.

The reason is that as coal plants disappear (which already account for less than 5%) and nuclear plants (it is expected that by the end of the next decade four of the seven plants will close, which in 2019 contributed 22%), gas will be one of the main cushions of flexibility to deal with the intermittency of renewables, which should raise their share to 74% by 2030.

In order for these combined cycle plants to remain in operation, the owner companies want a level of profitability that cannot be achieved without a specific remuneration system if the electricity system does not use them for a sufficient number of hours.

INSUFFICIENT INTERCONNECTIONS

Another “critical” instrument to guarantee supply, which offers flexibility to face the intermittency of renewables, are electricity interconnections.

The projects of lines with Portugal progress, as the IEA recalls, but not with France, which are the ones with the greatest potential, and which already in the past suffered strong delays (the Baixas-Santa Llogaia line, through Catalonia) or were even abandoned (the line through the Gistaín valley, in Aragon).

All this contributed to the failure to achieve the target of 10% exchange capacity with France in 2020, set by the European Union, and the agency has not just seen that 15% will be met by 2030.

To increase the share of renewables as planned and develop storage, those responsible for the study warn that a stable remuneration framework is essential. In his opinion, the updated auction mechanisms “are a step in the right direction” and the availability of investments seems on track.

A step that could be completed with the timely dissemination in reasonable time of the calendars and terms of the auctions to offer more clarity to investors.

Source: The Energy Newspaper