Last Friday, the directors of regulation of the three large companies (Endesa, Iberdrola and Gas Natural Group), accompanied by UNESA president, visited the European Commission in a desperate attempt to have Brussels endorse the renewables support reduction in Spain and the maintaining of the privileges enjoyed by the utilities for so many years in our country.
The utilities are probably not concerned that out of the cost of each kWh generated by the combined cycle plants, 80% goes abroad, or that dependence on foreign energy is perpetuated, which is the basis of their current business after the big bubble of unnecessary combined cycle facilities built in recent years with huge subsidies called “investment incentives”. We are confident that the European Commission, which has set a roadmap towards a change in the energy model will agree.
But what certainly Mr. Montes and his companions did not comment to the Commission was, among other things, the following:
– That it is precisely in the regulated business- in other words, the one causing the tariff deficit from the accounting perspective- where utilities generate more profits and have experienced major growth in recent years, a fact they even lay claim on when presenting results to shareholders. The total profits raised by this area of their business throughout this period of deficit accumulation have been greater than the incentives received by renewables and, indeed, their moderation would have contributed to a much smaller deficit right now.
– That, unaccountably, final settlement of the costs of transition to competition (CTCs) has not yet been cleared albeit already perceived by the utilities in that lucrative business in which they turned the market model change. Some estimations call for more than 3,000 million euros that the utilities should return, undoubtedly alleviating the deficit.
– That the free emission rights internalized in the ”pool” price were deduced from remuneration over the period 2006-2009 but not subsequently, nor in 2005. The outstanding amount to adjust would be over 4,000 million euros, which would also help to reduce the deficit significantly.
– That, likewise it is justified in renewables, the Supreme doctrine of the “reasonable profit” could apply to power plants that have virtually paid for themselves (nuclear and hydro), that with very little variable costs, take advantage of the ”pool” rising prices. A rigorous audit would demonstrate the very high cost margin that they have been earning for years and mechanisms to ensure this margin is applied to reduce the accumulated and future deficit, could be established.
– That, the combined cycle sector, this country’s real energy bubble, besides the “availability payment ” also perceives a grant called “investment incentive”, which was 20,000 € / MW / year for 10 years and was increased 26,000 € / MW / year by the previous minister, Miguel Sebastian, just before the government changed. This grant can in some cases represent up to 25% of the investment. In addition, this cost is included in the energy term and is not listed as regulated cost, reason why it is going unnoticed when talking about the deficit. With such subsidies, nor would some renewables need premiums.
– That utilities whose views on the reasonableness or otherwise of the regulatory framework depends on their particular positioning and time circumstances for each technology are included in the ranking of companies having received most renewable incentives.
Nor do we believe that they have transparently reported that the solar thermal has so far received around 3% of the premiums accumulated by the Special Regime making it necessary therefore to look for other responsible parties of the accumulated deficit until now. Furthermore, when all solar thermal power plants included in the Pre-allocation Registry are operating, they will represent a smaller annual cost than cogeneration, photovoltaic or wind.
This Government counts, therefore, on many tools to reduce the deficit, that do not necessarily go through discriminatory rates to solar technologies such as those commented in the media over the past days. Implementing these rates would mean infringing the legal security and reasonable profitability principles, as well as several articles of the Energy Charter Treaty, it would also be unconstitutional and confiscatory in addition to raising the country risk and lead to an undesired situation in the financial sector.
We know the European Union commitment towards renewables is very strong, particularly for solar energy, which with its diverse conversion forms, photovoltaic and thermal, will originate in the Southern countries to contribute in the future to a good part of the EU energy needs.
The change in the energy model is irreversible even if the utilities try to stop it in order to defend the privileged position they have been enjoying for so many years in our country showing no concerns about the energy dependence, the foreign trade deficit or the harm being made to an industry that can provide employment, energy independence and international expansion to the country.