Spain: The Minister for the Ecological Transition Proposes to Legislate to Avoid a Renewables Bubble

2 July 2019 - Andoni Archanco

On 26 June, the Acting Minister for the Ecological Transition, Teresa Ribera, declared in Luxembourg to a media source that she is considering legislation to regulate and govern access to the network of the new megawatts of renewable energy, and in this way avoid a possible bubble given that the number of applications for licences was higher than expected.

"There have been requests for evacuation capacity that are far superior to the forecasts of what we understand to be feasible in terms of investment, construction and start-up," stated Ribera.

The minister believes that "there is a part of this new installation of renewable capacity which is associated with auto-consumption,” but “there is another part that could be a business opportunity.”

"In comparison with a model in which very few were financially and technologically capable of generating and selling electricity, now practically anyone can do it," she summarised.

This highlights the “potential that Spain has in renewable energy matters,” but also implies that “there is a limitation, which is the evacuation capacity of that electricity generated through distribution networks and high voltage networks,” according to the minister.

All of this, according to her, has caused “a different challenge, which is how to assure that those networks work under balanced conditions, safely, and how entry to that network is authorised,” without sufficient capacity to handle all of the requests.

The regulations regarding evacuation capacity, shared between the National Commission on Markets and Competition (CNMC) and the Spanish government, foresee updating these rules given the new reality of the system and the heightened demand for network access points.

Nevertheless, the CNMC already has circulars (still pending definitive approval) on access and connection to the network in which regulating the situation is foreseen to avoid a bubble. (https://www.cnmc.es/node/375387).

"If it’s done, and surely we’ll have to do it, through a law, then it must be ensured that this will integrate into the system in an orderly fashion and not generate new bubbles,” added Ribera.

The minister stated that "in an environment like this, the worst thing to do is to act imprudently which would lead to a risk of a strong recession,” and highlighted the importance of avoiding a distinctly speculative market of resale of those licences.

The company which manages the networks, Red Eléctrica (REE), has warned of the increase in the requests and, without official data on the table, in the energy sector 150,000 megawatts (MW) in requests are spoken of, that is, practically three times the 55,000 MW which are included in the National Integrated Energy and Climate Plan (PNIEC) until 2030, as compared with the current 38,700.

"Margin for small errors? This is an area in which we are all learning. We must move with caution, and this is a warning, we don’t want a type of secondary market to be produced of evacuation permits which hinders the real answer that we do want, which is an energy system that is efficient, renewable and which operates safely and at accessible prices," he concluded.

Furthermore, and in matters of investments to finance the transition toward an economy that eliminates greenhouse gas emissions in 2050, he believes that “there is a battle that must be won, which is the complete recovery of trust.”

"Today our country generates more trust in external investors than a few years ago. The whole episode of the change of regime regarding renewable energy investments has had a large impact," said Ribera.

"For that reason, to advance the snapshot of the whole, the tools, a flexible level of predictability toward where we’re going, seemed to us to be clear to generate that trust in Spanish and international investors that wish to activate this change process, among others, the Norwegian sovereign wealth fund," he concluded.

For further information: Andoni Archanco