Pedro González, director of Regulation and Economic Affairs of UNESA, does not miss the opportunity provided by this opinion article to address the new Government of Spain – still to be constituted – and send a first message from the energy sector. He reminds the future executive that the economy decarbonization is possible, but it necessarily involves electrification. In this sense, González analyzes in depth the role that electrical networks will play in this important transformation process.
The publication by the Committee of Experts of the analysis and proposals for decarbonisation report is giving rise to an intense debate on what should be the best way to achieve the goals we are acquiring as a society. Personally I think the result of this report is conclusive: the road is electricity, there is no other. Thus, the only way for decarbonization to be carried out efficiently for society is electrification. We hope that the new Government is aware of this.
However, going back to the Committee of Experts´report, there is something that is noteworthy within it. When analyzing the part dedicated to electrical networks we notice that it only covers 6 pages in such a large report. It is as if in a debate on mobility we omitted to talk about roads, in telecommunications connections or airports in air transport. But, is it because the electrical networks are not important or conversely because they are, but nobody doubts them?
The European Commission intends to intensify the massive entrance of renewable energies or to empower the electrical consumer with a more active role
Let’s see, the European Commission intends to intensify the massive entrance of renewable energies or to empower the electrical consumer with a more active role, while more intensive uses are going to be granted to electricity which, as I have said, is the energy vector destined to decarbonization. But the way to promote these changes must necessarily involve the strengthening of the role of electricity networks, which become a critical element without which it would not be possible to connect several thousand new megawatts of renewable. Neither would its lack enable the consumer to choose new small-scale consumption / production modalities nor would it facilitate connecting new elements that require electrical consumption such as cars, ships, servers, etc. This is the reason why I believe that the importance of electricity networks, which also ensure the supply of energy as a territorial backbone and social cohesion element is not questioned.
So, starting from this premise, the most essential is to ensure that for all this to happen, the appropriate steps are taken so that the electricity grid, and mainly the distribution network, is prepared and acts as a facilitator of the sectoral transformation that is demanded. To this end, we must not forget that the main challenge facing the distribution network is its digitalization and automation, which requires disruptive technological elements, intensive in innovation in many cases, and that improve competitiveness.
The investment needs in networks could be in the region of 30,000 million euros by 2030
So far, the investment rhythm in the activity of distribution networks is high, about 1,100 million euros per year. However, a study recently presented estimates that this level of investment must rise even more – over the next decade – if we are to give an appropriate response to the transformations that are expected. To get an idea, the investment needs in networks could be in the region of 30,000 million euros by 2030. This represents the far from negligible investment figure of around 3% of GDP in Spain.
As far as the technological aspect is concerned, the impact of such an investment in the country’s economy is remarkable, because behind these investments there is a whole industry that must make it possible and make it a reality, with the consequent benefit it involves for the country in terms of job creation and wealth.
From the electrical industry we constantly insist on an aspect as relevant as is the establishment of an appropriate financial compensation rate.
As for the financial aspect, the ability to attract such a high volume of investment will undoubtedly become more plausible as two regulatory elements that go hand in hand come together: appropriate planning and reasonable remuneration. On the one hand, it is desirable to have a regulatory context that allows us to project investments reasonably over time, especially in a context of technological change such as that faced at this time. On the other hand, from the electrical industry we constantly insist on an aspect as relevant as is the establishment of an appropriate financial compensation rate that is generated on the basis of an objective methodology, aligned with the most common practices in Europe.
Without a plan adjusted to the changes that must be produced and a sufficient profitability able to attract the necessary capital to undertake the investments, it will be more difficult to successfully face future challenges and opportunities to decarbonize the economy. Therefore, a first message from the energy field for the new Government is that decarbonisation is possible, of course through electrification; but without appropriate electrical networks, the road will be more complicated.
Pedro González, Director of Regulation and Economic Affairs of UNESA, Spanish Association of the Electrical Industry