Spain shows political will to hit 2020 target and acknowledge coal miners too
by Arasan Aruliah
January 24, 2019
Spain’s largest independent supplier of electricity is committing to delivering an extra 3,000 GWh of renewables in a deal with Norwegian renewables giant Stakraft. When Prime Minister Pedro Sanchez took over last June, he promised to reverse the policies of his predecessor and commit to EU targets on renewables. Substantial social measures and a €250m fund have been agreed to try and make it a just transition. By getting everyone to the table, Spain can now embark on an ambitious plan that may just mean they hit their 2020 target after all.
FORTIA ENERGIA, the Spanish energy sourcing platform for large industrial consumers, and Statkraft, the Norwegian producer of renewable energy, have signed the first long-term power purchase agreement (PPA) for large industrial customers in Spain.
For a period of ten years Statkraft will supply 3,000 GWh of electricity to FORTIA. That’s enough to manage the power supply of large industrial companies in the steel, cement, metallurgy, chemical, paper and industrial gases sectors in the Iberian market (Andorra, Portugal and Spain). The energy will be sourced from Statkraft’s Spanish portfolio and primarily consists of new wind and solar projects already under construction.
At the end of 2018, mainland Spain had 98.65 GW of power generation capacity with demand estimated at 254,074 GWh this year. The additional 3,000 GWh brings hope that the country will now meet the EU’s 20% target for renewable energy generation by 2020. It currently stands at 17%.
It’s not just about the gigawatts, it’s about transition
FORTIA has annual sales of 11 TWh and is the largest independent supplier in the Iberian Electricity Market. Their press release says this is part of FORTIA’s strategy to provide industry with “competitive, diversified and balanced access to energy markets through new contractual models such as PPAs which are an opportunity for producers and consumers in the context of the energy transition.” They expect to announce more such PPAs “in the coming months.”
“We very much look forward to taking that next step in the energy transition together with our customers.” – Juan Temboury, Managing Director at FORTIA
Hallvard Granheim, Executive Vice President Markets & IT at Statkraft said the contract underlines “our commitment to powering major industrial companies across Europe with renewable energy.” Statkraft, owned by the Norwegian Government, is one of the largest managers of renewable assets on behalf of third parties in Europe, with a portfolio of circa 16,000 MW.
Prime Minister Sanchez has said that legislation on climate change was often unpopular with the general public. In particular, the recession of the last ten years made the energy transition a luxury that was hard to afford. But, going forward, he said it must not only happen, it must be “socially just”. Transition must not leave anyone behind, including coal miners that lose their jobs in the shift from fossil fuels.
The government now plans to invest €235bn from 2021-2030 as part of its energy and climate initiative. A new climate change law will be submitted to parliament by the end of this month. Last November they published a draft bill which included targets to cut its greenhouse gas emissions by at least 90% below 1990 levels by 2050, and to produce all of its electricity from renewable sources by the same date.
Stark contrast with the last government
This amounts to a reversal of the attitude of the administration in Madrid. Former Prime Minster Mariano Rajoy created a “sun tax” that imposed hefty taxes on small-scale renewable producers while ending payments for pumping their excess electricity back into the national grid. Sanchez scrapped it.
Rajoy’s administration also experienced clashes between the environment and energy ministries. For example, the Energy Ministry was working to prevent coal mine closures. Now, environmental and energy issues come under one single ministry, and 26 coal mines are being shut down.
Big blow to mining communities
Under an EU directive, all coal deposits that no longer make money and receive public funds were ordered to stop production by January 1 2019. Those mines that do not meet the deadline to cease production are supposed to hand the money back. It makes good economic and climate sense but comes at a high price for thousands of miners and their families.
To soften the blow to workers and the communities dependent on coal, Sanchez’s socialist government agreed to a deal with unions last October to smooth coal workers’ access to benefits such as early retirement and earmarked a €250m fund for aiding business ventures and re-purposing disused mines. The industry employed around 100,000 people in the 1950s but this has dwindled to around 2,000 today.
The continued decline of coal is also showing up in the annual statistics. In December, grid operator Red Electrica de Espana presented provisional data for 2018, saying that nuclear remained the number one source of electric power for Spain in 2018, with a share of 21.4%. Wind was again second at 19.8%. Hydro increased the most, going from 7.4% in 2017 to 13.7% in 2018. Coal’s share reduced by 2.6% to 14.5% of the total.
Spain is now clearly pointing in the right direction, with a particularly impressive performance from hydro. Given the country has only 12 months to get from 17% renewables to 20% by 2020, the new deal between Fortia and Statkraft is a welcome step forward.
As I reported earlier this week, the economics and technology already stack up in most cases. But when the established method of power generation, in this case coal, gets displaced by renewables it is always an extremely difficult decision for responsible governments. Having the political will to manage the transition in a way that considers everyone is what’s required to keep voters onside. Spain’s new government seems to have found it.