Spain’s Market Regulator Rejects Attempt to Save Coal Plants

Spanish market and competition regulator CNMC (Comisión Nacional de los Mercados y la Competencia) in a report published on January 24 said a draft government decree to block power plant closures if they threaten energy supply and security, or have unfavorable effects on power prices allows “too much discretion, on shaky legal ground.”

While the government issued its draft decree last November, it raised the possibility that it would block closure of “strategically important” coal plants earlier in the year after Endesa, a company owned by Italy’s Enel, last May suggested it would be forced to close its coal-fired Compostilla and Teruel plants, each 1.1 GW, because they were economically unviable under current market and regulatory conditions. In November, the country’s largest power company, Iberdrola, applied to shut down its last two Spanish coal-fired power plants, which have a combined capacity of 830 MW, triggering the government’s action, it was widely reported. (For more, see “Spanish Government Takes Steps to Support Coal-fired Generation,” in POWER’s January 2018 issue.)

Coal plants generated about 17.4% of Spain’s power in 2017 and have a total capacity of 105 GW (Figure 5). Because the country currently has a generation margin of about 30%—far exceeding the 10% to 15% sought by grid operators—the CNMC reasoned that the Spanish power system could absorb closure of up to 3 GW of Spain’s coal-fired capacity by 2020 without affecting reliability. The country—a signatory of the Paris agreement—committed to cutting 40% of its carbon emissions by 2030. Spain may add nearly 9 GW of mostly wind and solar photovoltaic capacity before the end of 2020, the market regulator noted.

5. Spain’s power generation mix in 2017. Coal plants in Spain generated 17.4% of the country’s total electricity in 2017. Only nuclear plants and wind farms generated more than coal’s share. Source: Red Electrica de Espana/POWER

“The Spanish electricity system will not have problems of security of supply in the medium nor the long term. (Even) in the worst scenario with demand peaking at 46,000 MW and low generation, a significant part of the existing coal park could be safely discarded,” the CNMC said. In its report, the regulator urged the government to instead review the regulatory framework as it applies to security of supply methodology, power plant mothballing, the capacity payment mechanism, and the authorization procedure for new installations.

Sonal Patel is a POWER associate editor.