Spain 2021 - Energy Policy Review

Energy Policy Review

Spain 2021

The IEA examines the

full spectrum

of energy issues

including oil, gas and

coal supply and

demand, renewable

energy technologies,

electricity markets,

energy efficiency,

access to energy,

demand side

management and

much more. Through

its work, the IEA

advocates policies

that will enhance the

reliability, affordability

and sustainability of

energy in its

30 member countries,

8 association

countries and beyond.

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International Energy Agency

Website: www.iea.org

IEA member

countries:

Australia

Austria

Belgium

Canada

Czech Republic

Denmark

Estonia

Finland

France

Germany

Greece

Hungary

Ireland

Italy

Japan

Korea

Luxembourg

Mexico

Netherlands

New Zealand

Norway

Poland

Portugal

Slovak Republic

Spain

Sweden

Switzerland

Turkey

United Kingdom

United States

The European

Commission also

participates in the

work of the IEA

IEA association

countries:

Brazil

China

India

Indonesia

Morocco

Singapore

South Africa

Thailand

INTERNATIONAL ENERGY

AGENCY

FOREWORD

Foreword

The International Energy Agency (IEA) has conducted in-depth peer reviews of its member

countries’ energy policies since 1976. This process supports energy policy development and

encourages the exchange of and learning from international best practices. By seeing what

has worked – or not – in the “real world”, these reviews help to identify policies that deliver

concrete results. Since 2017, the IEA has modernised the reviews by focusing on the key

challenges in today’s rapidly changing energy markets.

Spain has shown important leadership on clean energy transitions, including through support

for key IEA initiatives. I am especially grateful to Teresa Ribera – Fourth Vice President of

the Spanish Government and Minister for the Ecological Transition and the Demographic

Challenge – for her longstanding dedication to action on climate change and ensuring fair

and equitable energy transitions. She has played an invaluable role in the Global

Commission for Urgent Action on Energy Efficiency and the Global Commission on People-

Centred Clean Energy Transitions, two high-level groups of leading international figures that

I convened in recent years to bring greater attention and policy action in these critical areas.

Since the last IEA review in 2015, Spain has solved a long-standing problem of electricity

and gas tariffs not covering costs, and has closed all of its coal mines, allowing it to prioritise

the energy transition in its policy agenda. Spain has emphasised the concept of a just

transition by ensuring that communities in traditional energy sectors, notably coal mining,

are not left behind.

The Spanish framework for energy and climate is based on a 2050 objective of national

climate neutrality and 97% renewable energy in the total energy mix. As such, it is centred

on the massive development of renewable energy, energy efficiency, electrification and

renewable hydrogen. Notwithstanding its considerable progress to date on decarbonising

and increasing the share of renewables in the electricity sector, Spain’s total energy mix is

still heavily dominated by fossil fuels. The transport, industry and buildings sectors all have

considerable work ahead of them to meet the country’s targets for increasing the share of

renewables and reducing emissions.

When all of Spain’s plans and strategies are implemented, a completely different energy

sector will emerge, where fossil fuels are no longer dominant and end-user sectors are

mostly electrified. Such a transformation will bring new challenges in the form of energy

security, as fluctuating renewable generation will require new forms of back-up and flexibility.

The changes will also bring opportunities, particularly in areas such as energy system

integration. Importantly, Spain’s plans to recover from the COVID-19-induced economic

crisis present a major opportunity to frontload its planned investments in its clean energy

transition over the upcoming three years.

I sincerely hope that the recommendations proposed in this report will help Spain navigate

its energy system transformation as it seeks to build momentum towards achieving climate

neutrality and a renewables-based energy system by 2050.

Dr. Fatih Birol

Executive Director

International Energy Agency

TABLE OF CONTENTS

ENERGY INSIGHTS

1. Executive summary .....................................................................................................11

Overview ............................................................................................................................11

Climate change policies.....................................................................................................12

Energy efficiency ...............................................................................................................13

Electricity transition ............................................................................................................13

Energy system transformation ...........................................................................................14

Energy security ..................................................................................................................14

Key recommendations .......................................................................................................15

2. General energy policy .................................................................................................17

Country overview ...............................................................................................................17

Supply and demand ...........................................................................................................19

Institutions ..........................................................................................................................23

General energy policy overview ........................................................................................25

Energy security ..................................................................................................................30

Pricing and taxation ...........................................................................................................31

Assessment .......................................................................................................................32

Recommendations .............................................................................................................37

ENERGY SYSTEM TRANSFORMATION

3. Energy and climate change ........................................................................................39

Overview ............................................................................................................................39

Energy-related CO

emissions ..........................................................................................40

Carbon intensity .................................................................................................................42

Institutional responsibilities ................................................................................................43

Emission targets and strategy ...........................................................................................44

Adaptation to climate change ............................................................................................49

Assessment .......................................................................................................................50

Recommendations .............................................................................................................52

4. Energy efficiency .........................................................................................................55

Energy intensity .................................................................................................................55

Energy consumption by sector ..........................................................................................57

Institutional responsibilities ................................................................................................61

TABLE OF CONTENTS

Energy efficiency targets and strategies ...........................................................................61

Assessment .......................................................................................................................72

Recommendations .............................................................................................................75

5. Renewable energy .......................................................................................................77

Renewable energy in total final energy consumption .......................................................77

Renewable energy in electricity .........................................................................................80

Institutional responsibilities ................................................................................................81

Renewable energy policy ..................................................................................................82

Assessment .......................................................................................................................91

Recommendations .............................................................................................................93

6. Energy research, development and innovation .......................................................95

Overview ............................................................................................................................95

Energy innovation priorities and guiding documents ........................................................97

Key actors in Spain’s energy innovation ecosystem .........................................................99

Resource push ............................................................................................................... 100

Knowledge management ................................................................................................ 103

Market pull ...................................................................................................................... 104

Socio-political support .................................................................................................... 105

Assessment .................................................................................................................... 107

Recommendations .......................................................................................................... 108

ENERGY SECURITY

7. Electricity................................................................................................................... 111

Overview ......................................................................................................................... 111

Electricity supply and demand ........................................................................................ 112

Electricity market structure ............................................................................................. 114

Trade and interconnections ............................................................................................ 119

Electricity prices .............................................................................................................. 121

Electricity market regulation ........................................................................................... 123

Electricity market policies ............................................................................................... 126

Electricity security ........................................................................................................... 131

Assessment .................................................................................................................... 134

Recommendations .......................................................................................................... 137

8. Nuclear ....................................................................................................................... 139

Overview ......................................................................................................................... 139

TABLE OF CONTENTS

Nuclear policy ................................................................................................................. 140

Nuclear power plant operation ....................................................................................... 142

Nuclear fuel supply ......................................................................................................... 144

Decommissioning and radioactive waste management ................................................. 144

Research and development ........................................................................................... 149

Assessment .................................................................................................................... 149

Recommendations .......................................................................................................... 151

9. Coal ............................................................................................................................ 153

Overview ......................................................................................................................... 153

Supply and demand ........................................................................................................ 154

Coal policy ...................................................................................................................... 156

Assessment .................................................................................................................... 158

Recommendation ........................................................................................................... 159

10. Natural gas .............................................................................................................. 161

Overview ......................................................................................................................... 161

Supply and demand ........................................................................................................ 162

Gas prices ....................................................................................................................... 164

Institutions ....................................................................................................................... 166

Natural gas industry structure ........................................................................................ 167

Natural gas regulation .................................................................................................... 168

Natural gas market operation ......................................................................................... 170

Natural gas policy ........................................................................................................... 172

Natural gas infrastructure ............................................................................................... 174

Natural gas security of supply ........................................................................................ 177

Assessment .................................................................................................................... 180

Recommendations .......................................................................................................... 182

11. Oil ............................................................................................................................. 185

Overview ......................................................................................................................... 185

Supply and demand ........................................................................................................ 186

Oil market structure ........................................................................................................ 190

Oil market policies .......................................................................................................... 190

Prices and taxation ......................................................................................................... 192

Oil infrastructure ............................................................................................................. 194

Oil emergency policies and organisation ....................................................................... 196

Emergency oil stocks ...................................................................................................... 198

Assessment .................................................................................................................... 199

Recommendations .......................................................................................................... 201

TABLE OF CONTENTS

ANNEXES

ANNEX A: Organisations visited .................................................................................... 203

ANNEX B: Energy balances and key statistical data ..................................................... 206

ANNEX C: International Energy Agency’s “Shared Goals” ............................................ 210

ANNEX D: Glossary and list of abbreviations ................................................................ 212

LIST OF FIGURES, TABLES AND BOXES

Figures

Figure 2.1 Map of Spain ..................................................................................................19

Figure 2.2 Overview of Spain’s energy system by fuel and sector, 2019.......................20

Figure 2.3 Spain’s total energy supply by source, 2000-19 ............................................21

Figure 2.4 Spain’s energy production by source, 2000-19 .............................................21

Figure 2.5 Spain’s production/total energy supply by energy source, 2000-19 .............22

Figure 2.6 Spain’s total final consumption by sector, 2000-19 .......................................22

Figure 2.7 Spain’s total final consumption by source and sector, 2019 .........................23

Figure 3.1 Greenhouse gas emissions in Spain by sector, 1990-2018 ..........................40

Figure 3.2 Energy-related CO

emissions in Spain by sector, 2000-19 .........................41

Figure 3.3 Energy-related CO

emissions in Spain by energy source, 2000-19 ............41

Figure 3.4 Energy-related CO

emissions and key drivers in Spain, 2000-19 ...............42

Figure 3.5 CO

intensity in Spain and selected IEA member countries, 2000-19 ..........43

Figure 3.6 CO

intensity of electricity and heat generation in Spain and selected

IEA member countries, 2000-19 ....................................................................43

Figure 4.1 Energy consumption and drivers in Spain, 2000-19 .....................................56

Figure 4.2 Energy intensity in select IEA member countries, 2000-19...........................56

Figure 4.3 Energy consumption in Spain by sector, 2000-19 .........................................57

Figure 4.4 Energy consumption in transport in Spain by fuel, 2000-19 .........................58

Figure 4.5 Energy consumption in industry in Spain by fuel type, 2000-19 ...................58

Figure 4.6 Energy consumption in the residential sector in Spain by fuel, 2000-19 ......59

Figure 4.7 Breakdown of energy consumption in the residential sector in Spain

by use, 2018...................................................................................................60

Figure 4.8 Energy consumption in the services sector in Spain by fuel, 2000-19..........61

Figure 4.9. Spain’s cumulative final energy savings projected for 2021-30 ....................62

Figure 5.1 Renewable energy in total final energy consumption in Spain, 2019 ...........78

Figure 5.2 Renewable energy in total final energy consumption in Spain, 2000-19 ......79

Figure 5.3 Renewable energy as share of total final energy consumption

in IEA countries, 2018 ....................................................................................79

Figure 5.4 Renewable energy in electricity generation in Spain, 2000-19 .....................81

Figure 5.5 Renewable energy as a share of total electricity generatio

in IEA countries, 2019 ....................................................................................81

Figure 6.1 The IEA’s four functions of a successful innovation ecosystem for energy ..96

Figure 6.2 Energy-related public RD&D spending per GDP in IEA countries, 2018 ... 101

Figure 6.3 Energy-related public RD&D spending in Spain by category, 2000-18 ..... 101

Figure 6.4 Spain’s gross domestic expenditure on total R&D, 2000-18 ...................... 102

Figure 7.1 Spain’s electricity supply by source, 2000-19 ............................................ 113

Figure 7.2 Electricity generation by source in IEA member countries, 2019 ............... 113

TABLE OF CONTENTS

Figure 7.3 Electricity consumption in Spain by consuming sector, 2000-19 ............... 114

Figure 7.4 Spain’s current interconnections with neighbouring countries ................... 119

Figure 7.5 Spain’s electricity trade by country, 2000-19 .............................................. 120

Figure 7.6 Electricity price for industry in IEA member countries, 2019 ...................... 122

Figure 7.7 Electricity prices for households in IEA member countries, 2019 .............. 122

Figure 7.8 Electricity prices in Spain and selected IEA member countries, 2000-19 .. 123

Figure 7.9 Spain’s electricity system tariff balances, 2000-18 .................................... 124

Figure 7.10 Installed power capacity in Spain’s NECP’s target scenario ...................... 127

Figure 8.1 Final shutdown schedule of nuclear power plants in Spain according

to the NECP ................................................................................................ 140

Figure 8.2 Institutional structure of nuclear energy in Spain ....................................... 141

Figure 8.3 Capacity factors of nuclear power plants in Spain and the world .............. 143

Figure 8.4 The funding system for decommissioning of nuclear facilities and

radioactive waste management .................................................................. 148

Figure 9.1 Share of coal in different energy supplies in Spain, 2000-19 ..................... 153

Figure 9.2 Spain’s coal supply by source, 2000-19 ..................................................... 154

Figure 9.3 Spain’s coal net imports by country, 2000-19 ............................................ 155

Figure 9.4 Coal consumption in Spain by sector, 2000-19 .......................................... 155

Figure 10.1 Natural gas in energy production, total energy supply, electricity and

total final consumption in Spain, 2000-19................................................... 162

Figure 10.2 Natural gas consumption in Spain by sector, 2000-19 ............................... 163

Figure 10.3 Spain’s natural gas net imports, 2000-19 ................................................... 164

Figure 10.4 IEA comparison of industry and household gas prices, 2019 .................... 165

Figure 10.5 Natural gas prices in industry and households in selected IEA countries,

2000-19 ....................................................................................................... 166

Figure 10.6 Map of Spain’s natural gas infrastructure ................................................... 175

Figure 11.1 Share of oil in energy production, total energy supply, electricity and

total final consumption in Spain, 2000-19................................................... 186

Figure 11.2 Oil consumption in Spain by sector, 2000-19 ............................................. 187

Figure 11.3 Spain’s crude oil net imports, 2000-19 ....................................................... 188

Figure 11.4 Spain’s oil products imports and exports by country, 2000-19 .................. 188

Figure 11.5 Spain’s oil refinery output and demand, 2019 ............................................ 189

Figure 11.6 Spain’s oil refinery output, 2000-19 ............................................................ 189

Figure 11.7 Price comparison for automotive diesel in the IEA, Q3 2020 ..................... 194

Figure 11.8 Price comparison for unleaded gasoline in the IEA, Q3 2020 ................... 194

Figure 11.9 Price comparison for light fuel oil in the IEA, Q3 2020 ............................... 194

Figure 11.10 Map of the Spanish oil infrastructure ........................................................ 196

Figure 11.11 Spanish oil stocks, as of end November 2020 ......................................... 199

Tables

Table 5.1 Renewables auction results in Spain .............................................................84

Table 5.2 Spain’s renewable energy auction calendar ..................................................85

Table 8.1 Operating nuclear power plants in Spain in 2020....................................... 142

Table 8.2 The cost structure of nuclear power generation in Endesa ........................ 144

Table 8.3 Status of the decommissioning process of nuclear power plants

in Spain, 2020 ............................................................................................. 145

Table 8.4 Phases to implement the deep geological repository proposed in the draft

7th GRWP ................................................................................................... 147

TABLE OF CONTENTS

Table 10.1 Technical capacity (firm and interruptible) of international interconnections

(GWh/day) ................................................................................................... 176

Table 10.2 Spanish liquefied natural gas import terminals (operating facilities) .......... 176

Boxes

Box 6.1 IEA framework for energy innovation policies ...............................................96

ENERGY INSIGHTS

1. Executive summary

Overview

Since the last International Energy Agency (IEA) in-depth review in 2015, Spain has solved

a long-standing issue of tariff deficits in its electricity and gas sectors and closed all of its

coal mines, which has allowed it to prioritise the issue of climate change on its national

agenda and align its goals with European Union (EU) objectives and ambitions. In doing

so, Spain has placed the energy transition at the forefront of its energy and climate change

policies.

The current Spanish framework for energy and climate is based on the 2050 objectives of

national climate neutrality, 100% renewable energy in the electricity mix and 97%

renewable energy in the total energy mix. As such, it is centred on the massive

development of renewable energy, particularly solar and wind; energy efficiency;

electrification; and renewable hydrogen. This is seen as an opportunity to stimulate the

economy; create jobs; modernise industry; enhance competitiveness; support vulnerable

groups; improve energy security; and support research, development and innovation.

Notwithstanding its considerable progress to date on decarbonising and increasing the

share of renewables in the electricity sector, Spain’s total energy mix is still heavily

dominated by fossil fuels. Notably, the transport, industry and buildings sectors all have

considerably more work ahead of them to meet the country’s targets for renewables

penetration and decarbonisation.

Moreover, under Spain’s decentralised system of government, regional administrations

have considerable authority over energy policy development and implementation, making

effective co-ordination between the centre and the regions even more critical to successful

enactment of energy strategies in Spain.

When all of Spain’s plans and strategies are implemented, a completely different energy

sector will emerge, where fossil fuels are no longer dominant and end-user sectors are

mostly electrified. Such a transformed energy landscape will come with new challenges

and will provide new opportunities.

The challenges include energy security. The current system is backed up by massive

stocks of oil, gas and coal that can be dispatched in a flexible way; the new system, with

a large share of variable renewable generation, will require other forms of longer term

backup, on top of short-term flexibility. New vulnerabilities will also arise, as electrification

goes hand-in-hand with smartening of the system and digitalisation.

The opportunities are with energy system integration. The new energy system can be

much more efficient than the current one, as end-use sectors can be coupled with higher

electrification, the use of residual heat, waste to energy, but also using electricity to

1. EXECUTIVE SUMMARY

produce renewable gases like hydrogen, among others. It will be important for Spain to

adapt the policy and regulatory framework, where needed, to gradually shape such a new

integrated energy system.

The current post-COVID-19 recovery context presents Spain with an important opportunity

to frontload its planned energy transition investments to the upcoming three years. Spain

is currently working on its green recovery plan, as it will be one of the key beneficiaries of

EU recovery funds. The main areas defined in the initial draft of Spain’s Recovery and

Resilience Plan for the energy transition are efficiency, sustainable mobility, renewable

energies, electricity infrastructure, storage and flexibility, and green hydrogen. Spain

should capitalise on this opportunity to jumpstart actions outlined in its National Energy

and Climate Plan (NECP).

Climate change policies

s a member of the European Union (EU), Spain is bound by EU targets for energy and

climate change as part of the Energy Union.

Toward this end, the central strategy document guiding Spain’s energy and climate policies

over the coming decade is its NECP for the period 2021-30. It outlines a number of policy

actions in various sectors that will support the country’s climate targets, including in the

areas of energy efficiency, renewables and transport. Its 2030 objectives include: a 23%

reduction in greenhouse gas emissions from 1990 levles; a 42% share of renewables in

energy end use; a 39.5% improvement in energy efficiency; and a 74% share of

renewables in electricity generation. Policies include increasing renewable power

installations and boosting the use of renewable gases in the power sector, modal shifts

and electrification in the transport sector, refurbishments and increasing the use of

renewable heating in the residential and commercial sectors, promoting energy efficiency

and fuel switching in the industry sector, and energy efficiency improvements in the

agricultural sector. The government anticipates that investments of EUR 241 billion will be

needed to enact the measures outlined in the NECP, out of which 80% is estimated to

come from the private sector.

Domestically, the Climate Change and Energy Transition Bill places the fight against

climate change and the need for an energy transition at the centre of the economy and

society. Its main targets are similar to those in the NECP, also placing renewable energy

and energy efficiency at the centre of the energy transition.

Notably, Spain has emphasised the concept of a just transition to ensure that communities

in traditional energy sectors, notably coal mining, are not left behind. To this end, Spain’s

Just Transition Strategy includes measures to promote employment opportunities in the

energy transition, supported by a framework of vocational training, active labour policies,

support measures to the most vulnerable and economic stimulus plans for those regions

most affected by the energy transition. These are executed through “just transition

agreements” between the government, unions and businesses, which can serve as an

example to other countries facing similar issues.

1. EXECUTIVE SUMMARY

ENERGY INSIGHTS

Energy efficiency

pain’s overall energy strategy employs an “efficiency first” principle. In all sectors, Spain’s

energy transition objectives hinge heavily on reducing consumption. Already, Spain has

begun to decouple economic growth from energy consumption; energy intensity, the ratio

of total consumption to gross domestic product, fell by 18% between 2008 and 2019. Still,

more reductions will be needed across all sectors.

The Bill on Climate Change and the Energy Transition as well as the NECP outline a

number of measures to improve efficiency and reduce consumption in all economic

sectors, including transport, buildings and industry. The policy plans are extensive and can

achieve strong results, but will need to be accompanied by a predictable, long-term

regulatory framework; sufficient incentives to mobilise private investments; and adequate

public financing to underpin all the programmes over the coming decade.

In addition, under Spain’s decentralised system of government, the implementation of a

number of efficiency measures for transport, buildings and industry will fall on regional and

local governments, making co-ordination between the central government and

regional/local administrations as well as skills capacity at all levels of government essential

to success.

Electricity transition

Spain is progressing toward its 2030 targets, notably in the electricity sector. After a slump

in investments between 2013 and 2018 due to a lack of financial means to promote

renewables, investments took off again in 2019. The share of renewables (including

non-renewable waste) in the national electricity mix grew from 24% in 2009 to 38%

in 2019. As such, Spain is well on track to meet its 2020 target to source 42% of its

electricity from renewables.

Though Spain’s progress on ramping up renewables in its electricity mix is commendable,

the future trajectory of its power mix warrants careful consideration to ensure a smooth

transition. To start, Spain plans to phase out both coal and nuclear power generation. The

coal phase-out appears well on track, with coal only providing around 5% of electricity

generation in 2019 and even less in 2020. Nuclear power, which accounted for 22% of

power generation in 2019 (and an important source of low-carbon generation), will begin

shutting down from 2027. Four of Spain’s seven nuclear reactors are scheduled to close

by the end of 2030, representing around 4 gigawatts of capacity. Natural gas

combined-cycle plants provide around one-third of power generation, and will be crucial to

balancing out a power system that is heavily dependent on variable renewables once coal

and nuclear have left the market. As such, the government will need to pay special

attention to prevent natural gas generation capacity from simultaneously exiting the

system. In this regard, the government should thoroughly assess the cost implications for

consumers of the expedited phase-out of both coal and nuclear generation.

Spain’s targets also foresee a sizeable buildout of new renewables capacity to reach 74%

of electricity generation by 2030, notably wind and solar. As such, a stable, long-term

remuneration framework for supporting the growth of renewables, including for storage,

will be essential. Spain’s updated auction mechanisms are a step in the right direction, and

investor sentiment and availability of financing appears on track. Additional help could

1. EXECUTIVE SUMMARY

come in the form of expedited permitting and timely issuance of auction schedules and

terms to improve investment clarity.

Moreover, the trajectory will require a concerted focus on system integration of variable

renewables in the coming years. The government’s strategy is centred on

interconnections, storage, demand-side management and digitalisation. Public

consultations and regulatory proceedings are underway in all of these areas, though timely

issuance of a regulatory framework will be crucial to mobilising investments, including in

next-generation technologies such as biogas and hydrogen. Co-operation with

neighbouring governments on interconnection capacity will also be a key element of

utilising Spain’s full production capacity on renewables, notably with France to expand

connection of the Iberian peninsula with the rest of continental Europe.

Energy system transformation

Beyond the electricity sector, the government plans to expand self-consumption of

renewables and distributed generation, as well as promote the use of renewables in the

industry and heating sectors. It also has plans to support the production of advanced

biofuels and renewable gases, as well as hydrogen.

Overall, Spain plans to move toward a full energy system transformation, the foundations

of which will be laid in the coming decade. The Long-Term Strategy projects that the

electrification of the economy will be over 50% by 2050.

In order to integrate more renewables into other sectors of the economy, the government

has a four-pronged strategy: 1) energy efficiency first; 2) renewables-based electrification;

3) storage; and 4) indirect electrification through renewable gases, mainly hydrogen. The

promotion of renewable gases is a critical measure outlined in Spain’s NECP, with uses

planned in mobility, industry, seasonal storage and synthetic fuels.

To this end, the government has several initiatives in place or underway to jumpstart plans

and investments in the 2030 time frame, including a Hydrogen Roadmap, a Biogas

Roadmap, an Offshore Wind Roadmap, a self-consumption strategy public consultation

and a smart meter evolution public consultation.

As Spain looks to a future of increased electrification of end-use sectors and sector

coupling – an essential element to achieve an energy transition – the competitiveness of

electricity against fossil fuels will be a critical element to achieving the desired results. As

such, Spain should consider changes to its taxation system, notably to incorporate the cost

of carbon into end-use prices, to reduce barriers to increased uptake of clean electricity in

more end uses.

Energy security

From an energy security perspective, although Spain continues to be heavily dependent

(73% dependency) on foreign sources for its energy, its sources for oil and gas are

relatively well diversified and the government has robust emergency response frameworks

in place in the case of a disruption.

1. EXECUTIVE SUMMARY

ENERGY INSIGHTS

Though the new policies and increased electrification will reduce Spain’s import

dependency, the rapid closure of coal and nuclear facilities over the coming decade bears

watching, as it could increase the country’s call on natural gas, especially if new

renewables capacity cannot be built as quickly as planned.

Interconnectivity with other European countries is also a critical element for Spain to

improve security of supply. While electricity projects with Portugal are progressing, existing

interconnection with France is often congested and new projects have been delayed,

causing Spain to fall short of its EU interconnectivity targets of 10% by 2020 and putting

at risk its 15% target by 2030.

Key recommendations

The government of Spain should:

 Ensure that the National Recovery and Resilience Plan supports achieving the NECP’s

targets

 I

mprove co-ordination with regional authorities and municipalities to implement t

ECP’s measures, especially on energy efficiency, more effectively.

 Reinforce efforts to create more flexibility in the electricity market and to ensure proper

price signals for investments in generation, through increased interconnectivity,

continued integration of regional markets, and the development of demand-sid

esponse and storage.

 Review taxation to avoid excess charges and distortionary impacts on electricit

elative to oil and gas consumption to promote electrification. Consider additional

carbon-based taxation as well as other mechanisms to progressively redistribute

electricity charges among all actors in the energy system.

ENERGY INSIGHTS

2. General energy policy

Key data

(2019)

otal energy supply (TES): 121.4 Mtoe (oil 42.4%, gas 25.4%, nuclear 12.5%, bioenergy

and waste 6.6

%, coal 4.0%, wind 3.9%, solar 2.8%, hydro 1.7%, electricity imports 0.5%), -

4.5

% since 2009

TES per capita:

2.6 toe/cap (IEA average* 3.7 toe/cap, IEA median 3.5 toe/cap)

TES per unit of GDP

:* 68 toe/USD million (IEA average* 85 toe/USD million, IEA median

toe/USD million PPP)

otal final consumption (TFC): 85.5 Mtoe (oil 50.8%, electricity 23.8%, natural gas 17.1%,

bioenergy and waste 6

.9%, solar 0.4%, coal 1.0%), -12.1% since 2008

TFC per capita

: 1.8 toe/cap (IEA average* 2.8 toe/cap, IEA median 2.4 toe/cap)

TFC per unit of GDP

:** 48 toe/USD million (IEA average* 62 toe/USD million PPP, IEA

median 62 toe/USD million PPP)

Energy producti

on: 34.0 Mtoe (nuclear 44.8%, biofuels and waste 24.5%, wind 14.1%,

solar

9.9%, hydro 6.2%, natural gas 0.3%, oil 0.1%), +11.9% since 2009

Weighted average of IEA member countries in 2018.

GDP data are expressed in 2015 prices and purchasing power parity (PPP).

Country overview

pain has a population of around 47 million and an area of 505 000 km

. It covers most of

the Iberian peninsula and also includes the Canary Islands, Balearic Islands and the

autonomous cities of Ceuta and Melilla in North Africa. Due to its size and geography, the

country’s climate can vary substantially by region.

Spain’s population has been stable since 2008, after increasing in previous years due to

immigration. The Spanish economy grew by 4.5% between 2008 and 2018, as the financial

crisis in 2008 strongly affected the industry, services and transport sectors. After

decreasing by 9% between 2008 and 2013, the economy rebounded by 14% between

2013 and 2018. This successful recovery has been guided by structural reforms, robust

employment growth and gains in competitiveness, allowing Spain’s economic growth to be

consistently higher than that of the euro area between 2014 and 2018 (OECD, 2018).

However, unemployment rates remain higher than the OECD average, with youth

unemployment close to 40%.

2. GENERAL ENERGY POLICY

In 2020, Spain was hit hard by the COVID-19 pandemic. OECD projections forecast

Spain’s economy to contract by 14.4% in 2020, or by 11.1%. The rebound for 2021 is

predicted to be between 5% and 7% (OECD, 2020).

The services sector accounted for almost three-quarters of gross domestic product (GDP)

in 2018, industry for almost one-quarter and the agricultural sector for the remaining 3%.

All shares are close to the OECD average. Tourism is particularly important, and Spain’s

tourism industry was the second-largest in the world in terms of financial receipts and the

fourth-largest in terms of arrivals. The impact of COVID-19 on the tourism sector was very

strong, as Spain closed its borders for nearly four months due to the pandemic between

February and June 2020.

Since 1978, Spain has been a parliamentary monarchy, and the king has a limited role in

day-to-day politics. The government is led by Prime Minister Pedro Sánchez of the Spanish

Socialist Workers’ Party (PSOE), who took over on 1 June 2018 after seven years under

a government led by Mariano Rajoy of the People’s Party. Sánchez called an early general

election in April 2018, but did not form a government, leading to another election in

November 2019. The PSOE and Unidas Podemos formed the first Spanish coalition

government since 1978, and Sánchez was renominated as Prime Minister on 13 January

2020.

A fairly decentralised country, Spain is divided into 17 autonomous communities, each with

its own parliament, plus 2 autonomous cities (Ceuta and Melilla). In the energy sector, the

autonomous regions are responsible for areas such as authorising certain power plants

and energy networks. Spain joined the European Union (EU) in 1986 and adopted the euro

as its currency in 2002.

2. GENERAL ENERGY POLICY

ENERGY INSIGHTS

Figure 2.1 Map of Spain

Supply and demand

Most of Spain’s energy supply and demand is met with fossil fuels, which accounted for

72% of total energy supply (TES)

and 68% of total final consumption (TFC)

in 2019

(Figure 2.2). Only one-quarter of TES was produced domestically in 2019; the remainder

was imported.

Domestic production consists mostly of nuclear energy (45% of total production) as well

as bioenergy and waste and other renewables, notably wind and solar. Production of

TES is made up of production + imports – exports – international marine and aviation bunkers ± stock changes. This

equals the total supply of energy that is consumed domestically, either in transformation (e.g. power generation and

refining) or in final use. Nuclear energy supply in TES includes losses. The primary energy equivalent of nuclear

electricity is calculated from the gross electricity generation by assuming a 33% conversion efficiency.

TFC is the final energy consumption (electricity, heat and fuel, such as natural gas and oil products) by end users,

not including the transformation sector (e.g. power generation and refining).

2. GENERAL ENERGY POLICY

renewable energy increased by 47% between 2009 and 2019 to cover more than half of

total domestic production in 2019 (55%).

TES is dominated by oil and gas, which accounted for 42% and 25% of TES, respectively,

in 2019. TES was 121 million tonnes of oil equivalent (Mtoe) in 2019, with an additional

12 Mtoe of oil products used in international marine bunkers and aviation. However, the

share of renewables significantly increased between 2009 and 2019, reaching 15% of TES

in 2019 compared with 11% in 2009.

Transport and industry are the highest energy-consuming sectors, accounting for 38% and

29% of TFC, respectively, followed by the residential (17%) and services (16%) sectors. TFC

was 86 Mtoe in 2019, with high shares of oil (51%) and gas (17%). Electricity, on the other

hand, was largely used in the services (53%) and residential (43%) sectors. Bioenergy and

waste were also a significant source of energy for residential consumption in 2019,

accounting for 18% of TFC in the sector.

Figure 2.2 Overview of Spain’s energy system by fuel and sector, 2019

While producing renewables and nuclear energy, Spain relies on imports of fossil fuels, which

accounted for almost three-quarters of total supply and TFC in 2019.

* Total energy supply + international bunker fuels.

**Other renewables includes wind, hydro, solar and a small amount of geothermal.

Notes: Mtoe = million tonnes of oil equivalent. TFC = total final consumption.

Source: IEA (2021), IEA World Energy Statistics and Balances (database), www.iea.org/statistics

Total energy supply

TES in Spain peaked in 2007, before dropping in the following years as a consequence of

the financial crisis, which led to a decrease in supply to match cuts in the

energy-consuming sectors (Figure 2.3). Between 2014 and 2017, however, TES started

to increase again, rebounding by 10% in three years, to compensate for half of the 20%

drop experienced between 2007 and 2014. In 2019, TES again fell to 121 Mtoe from

126 Mtoe in 2017. Natural gas, oil, and bioenergy and waste were the main sources

supporting this increase, while energy from solar and wind remained flat between 2014

and 2018, due to a decline in investor confidence after a major overhaul of the renewables

support mechanism. Compared with other International Energy Agency (IEA) member

countries, Spain ranks 20th for its share of fossil fuels in TES, which in 2018 accounted

for 74% of total supply.

100

120

140

Production Total supply* TFC (by fuel) TFC (sector demand)

Mtoe

Bunker oil

District heat

Electricity

Other renewables**

Bioenergy and waste

Natural gas

Oil

Coal

Nuclear

Imports

Transformation and losses

Residential

Transport

Industry

Services

2. GENERAL ENERGY POLICY

ENERGY INSIGHTS

Figure 2.3 Spain’s total energy supply by source, 2000-19

TES in Spain peaked in 2007 and fell afterwards as an effect of the financial crisis. Between

2014 and 2018, total supply started to increase again, though fell again in 2019.

Notes: Mtoe = million tonnes of oil equivalent. The share of geothermal is not visible at this scale.

Source: IEA (2021), IEA World Energy Statistics and Balances (database), www.iea.org/statistics

Energy production and import dependency

As opposed to TES, domestic energy production increased by 12% in Spain between 2009

and 2019 (Figure 2.4). Nuclear energy consistently provided around 15 Mtoe per year, while

energy from coal decreased by almost 80% between 2008 and 2018; production ceased

entirely in 2019. In contrast, energy production from bioenergy and waste, wind, and solar

experienced a steady upward trend in the same decade (46% growth), leading to an increase

in energy production from renewables and waste of 54% of total production in 2019.

Figure 2.4 Spain’s energy production by source, 2000-19

Total domestic energy production did not change significantly between 2010 and 2019, but

the share of coal has significantly decreased, balanced by increased renewables.

Note: Mtoe = million tonnes of oil equivalent.

Source: IEA (2021), IEA World Energy Statistics and Balances (database), www.iea.org/statistics

Spain’s domestic production covers about one-quarter of TES (Figure 2.5), though the

country completely relies on imports for oil and gas. Internal production

100

120

140

Mtoe

Heat

Electricity imports

Bioenergy and waste

Solar

Geothermal

Wind

Hydro

Nuclear

Natural gas

Oil

Coal

Mtoe

Geothermal

Solar

Wind

Hydro

Bioenergy and waste

Natural gas

Oil

Coal

Nuclear

2. GENERAL ENERGY POLICY

of coal covered up to 40% of total energy supply in 2010, but since fell to less than 10%

self-sufficiency in 2018 and 0% in 2019.

Figure 2.5 Spain’s production/total energy supply by energy source, 2000-19

Three-quarters of total supply are imported, with high dependency on imported fossil fuels.

Note: Domestic energy production as a share of total energy supply + international bunker fuels (oil).

Source: IEA (2021), IEA World Energy Statistics Balances (database), www.iea.org/statistics

Energy consumption

After peaking in 2007, TFC decreased in Spain as a consequence of the economic crisis,

until 2014, when it started to increase again to reach 86 Mtoe in 2019 (Figure 2.6). Most

of these changes were guided by the transport and industry sectors, which saw outsized

impacts on consumption from the crisis in 2008.

Figure 2.6 Spain’s total final consumption by sector, 2000-19

Total final consumption peaked in 2010, after which it fell until 2014, then increased again

until 2019. Most of the energy is used in the transport and industry sectors.

* Industry includes non-energy consumption.

** Services/other includes commercial and public services, and agriculture and forestry.

Note: Mtoe = million tonnes of oil equivalent.

Source: IEA (2021), IEA World Energy Statistics and Balances (database), www.iea.org/statistics

10%

15%

20%

25%

30%

35%

40%

45%

Total energy

Coal

Oil

Natural gas

100

Mtoe

Industry*

Transport

Residential

Services/other**

2. GENERAL ENERGY POLICY

ENERGY INSIGHTS

The transport sector was the largest energy-consuming sector in 2019, with final

consumption of 33 Mtoe. More than 90% of transport consumption constituted oil

(Figure 2.7), with a small share of biofuels. Industry was the second-largest sector in TFC,

consuming 25 Mtoe in 2019. Final consumption in the industry sector is almost equally

provided by gas, oil and electricity. The residential and services sectors used 15 Mtoe and

13 Mtoe in 2019, respectively. Electricity is the first energy carrier used in these sectors,

followed by oil and gas. Bioenergy has an important role in residential consumption,

covering 18% of the sector’s demand.

Figure 2.7 Spain’s total final consumption by source and sector, 2019

Oil covered half of total final consumption in 2019. The transport and industry sectors are

dominated by fossil fuels, but electricity is significant in the residential and services sectors.

* Industry includes non-energy consumption.

** Services/others includes commercial and public services, and agriculture and forestry.

*** Other renewables includes geothermal and solar thermal.

Source: IEA (2021), IEA World Energy Statistics and Balances (database), www.iea.org/statistics

COVID-19 impacts on energy demand

Spain declared a state of emergency between 14 March 2020 and 20 June 2020 due to

the COVID-19 pandemic. During this time, total electricity demand fell by 12.7% relative to

the same period in 2019, hitting an 18% decline during the period of total confinement

between 30 March and 12 April, led by the industry and services sector. Natural gas

demand during the emergency period fell by 15.5% while petroleum products demand fell

more significantly, by 60% for gasoline, 43% for diesel and 88% for aviation fuels.

Institutions

In the energy sector, the Ministry for the Ecological Transition and the Demographic

Challenge – currently led by Teresa Ribera Rodríguez – holds the basic competencies on

energy, which are focused at the national level, and leads on energy policy formulation.

The main responsibilities of the ministry include:



regulations concerning energy and mining matters, which are shared with other ministries

for evaluation

51%

26%

16%

93%

31%

17%

19%

21%

36%

18%

24%

53%

43%

26%

0% 20% 40% 60% 80% 100%

Total

Services/other**

Residential

Transport

Industry*

Oil

Natural gas

Coal

Bioenergy and waste

Other renewables***

Electricity

Heat

2. GENERAL ENERGY POLICY



legislation overseeing the tariff structure, prices of energy products, and levies and tolls

(though the regulator sets the rates)



legislation to save energy, promote renewable energy, and support new energy and mining

technologies



legislation of measures to ensure energy supply



legislation and actions related to the demographic challenge.

The Secretary of State for Energy falls under this ministry, while the Directorate General

for Energy Policy and Mining falls under the Secretary of State for Energy. Also under the

Secretary of State for Energy are several institutions that hold competencies in various

areas of energy policy, including:



The Just Transition Institute, which oversees the economic transition of regions where coal

mines and coal power plants are closing.



The Institute for Energy Diversification and Savings (IDAE), which oversees research

programmes on electrification, mobility, energy efficiency and renewable energy, among

others. Its activities include increasing public knowledge and awareness, technical advice,

and project financing of technology innovations.



The Corporation of Strategic Reserves of Oil Products (CORES), which is the stockholding

agency in charge of maintaining stocks of oil products and monitoring industry obligations

to hold stocks of oil products, liquefied petroleum gas and natural gas. CORES also verifies

operators’ obligations to diversify their natural gas supplies.



The City of Energy Foundation, which is focused on the execution of research and

innovation programmes related to energy and the environment and contributing to

economic development.



The National Radioactive Waste Company (Enresa), which is focused on the management

of radioactive waste.

The Secretary of State for Environment also falls under the Ministry for the Ecological

Transition and the Demographic Challenge. Within the Secretary of State for Environment

are the Spanish Office for Climate Change, which provides advice to different bodies of

government on climate change, as well as the National Climate Council, which

co-ordinates the development and monitoring of climate change policies and measures of

the central government. The National Climate Council promotes information gathering,

analysis, preparation and implementation actions.

The National Commission of Markets and Competition (CNMC) is an independent

regulatory body that reports directly to the Spanish parliament. Its authorities on energy

include supervising and controlling the proper operation of energy markets and calculating

network access tariffs according to transmission and distribution costs. The CNMC also

supervises access to cross-border interconnections. At the EU level, the CNMC

co-operates with other regulators through the Council of European Energy Regulators and

the Agency for the Co-operation of Energy Regulators on developing network codes and

implementing the internal electricity market.

The Nuclear Safety Council (CSN) has authority over matters of nuclear safety and

radiation protection. It is directly accountable to the Spanish parliament and formally

independent from the administration.

2. GENERAL ENERGY POLICY

ENERGY INSIGHTS

The National Statistics Institute publishes statistical information on various fields such as

the economy, society and the environment, among others, in order to facilitate

decision making.

Other relevant ministries and bodies in the energy sector that co-ordinate policies with the

Ministry for the Ecological Transition and the Demographic Challenge are:



The Ministry of Agriculture, Fishing and Food is responsible for several energy-related

policies, such as air pollution and climate change.



The Ministry of Economic Affairs and Digital Transformation is in charge of the proposal

and execution of the government’s policies on economic issues and reforms to improve

competitiveness, industrial development, telecommunications and the information society,

development of the Digital Agenda, and other competencies and powers conferred by the

legal system.



The Ministry of Science and Innovation is responsible for the execution of the government's

policy regarding scientific and technical research, technological development and

innovation in all sectors, including the management of international relations in this area

and Spanish representation in programmes, forums and international organisations,

including the European Union.



The Ministry of Industry, Trade and Tourism develops and implements government policy

in the areas of industry, trade and tourism.



The Ministry of Transport, Mobility and Urban Agenda oversees land, aviation and maritime

infrastructure; the control, management and administrative regulation of transport services;

as well as access to housing, building, urban planning, land and architecture.

The autonomous communities have legal competencies related to energy, primarily in

authorising power plants of less than 50 megawatts (MW), and distribution networks of

electricity and natural gas. They are also heavily involved in designing and implementing

climate change, energy efficiency and renewable energy policies at the regional level.

General energy policy overview

Spain has built a stable, long-term strategy to transform the Spanish economy to a more

sustainable one, providing investment signals to guide its industrial composition toward

one where future competitive advantages are focused on greater innovation, better

efficiency and zero environmental footprint.

One of the major changes in Spain’s energy system since the last in-depth review has

been addressing the so-called tariff deficit, or a major imbalance between regulated costs

and revenues of the electricity and gas systems. In recent years, Spain has made

considerable headway in managing the tariff deficit in its electricity system, in part caused

by significant subsidies for renewables, which peaked at EUR 6.3 billion in 2008. Since

reforms enacted in 2013, system costs have been balanced with revenues, and a small

surplus was even recorded in 2014-18. A small deficit is expected for 2019, though

surpluses from previous years will cover it. The gas sector tariff deficit has similarly been

erased.

The current Spanish framework for energy and climate is based on the 2050 objectives of

national climate neutrality, 100% renewable energy in the electricity mix and 97%

renewable energy in the total energy mix. As such, it is centred on the massive

2. GENERAL ENERGY POLICY

development of renewable energy, particularly solar and wind; energy efficiency;

electrification; and renewable hydrogen. This is seen as an opportunity to stimulate the

economy; create jobs; modernise industry; enhance competitiveness; support vulnerable

groups; improve energy security; and support research, development and innovation.

As a member of the EU, Spain is bound by European targets for energy and climate

change as part of the Energy Union, which for 2020 include: a 20% reduction in

greenhouse gas (GHG) emissions, 20% of energy from renewable sources, a 20%

improvement in energy efficiency and a 10% electricity interconnection target. For 2030,

the level of ambition will grow to: a minimum 40% reduction in GHG emissions, a minimum

32% share of renewable energy, a minimum 32.5% improvement in energy efficiency and

a 15% interconnection target. The EU is currently finalising plans to further strengthen the

2030 targets; notably the GHG emissions reduction target is planned to increase from 40%

to 55%.

To achieve these targets, the central strategy document guiding Spain’s energy and

climate policies over the coming decade is its National Energy and Climate Plan (NECP)

for the period 2021-30, which Spain submitted to the European Commission in early 2020.

The document outlines a number of policy actions in various sectors that will support the

country’s climate targets, including in the areas of energy efficiency, renewables and

transport. Its 2030 objectives include: a 23% reduction in GHG emissions from 1990 levels;

a 42% share of renewables in energy end use; a 39.5% improvement in energy efficiency;

and a 74% share of renewables in electricity generation. Policies include increasing

renewable power installations and boosting the use of renewable gases in the power

sector, modal shifts and electrification in the transport sector, refurbishments and

increasing the use of renewable heating in the residential and commercial sectors,

promoting energy efficiency and fuel switching in the industry sector, and energy efficiency

improvements in the agricultural sector.

The government anticipates that investments of EUR 241 billion will be needed to enact

the measures outlined in the NECP, out of which 80% is estimated to come from the private

sector. It expects that as a result of the NECP’s measures, Spain will create up to 350 000

jobs annually, increase its GDP as much as EUR 25.7 billion, and avoid 2 400 premature

deaths.

Domestically, the Spanish government issued the Climate Emergency Declaration in

January 2020, which outlined 30 action areas to reach the climate neutrality goal by 2050,

with its three pillars being: 1) the Climate Change and Energy Transition Law; 2) the Just

Transition Strategy; and 3) the Long-Term Strategy. A supplemental National Energy

Poverty Strategy was also issued.

The Climate Change and Energy Transition Bill, approved by the government in May 2020

to be discussed in parliament, places the fight against climate change and the need for an

energy transition at the centre of the economy and society. Enshrining the principle of

carbon neutrality by 2050, it is the framework that will facilitate the co-ordination of policies

among different fields with coherence (see the section on climate change for more details).

Its main targets are similar to those of the NECP and include achieving at least 70% of

renewables in electricity by 2030 and 100% by 2050, at least 35% renewables in final

energy consumption by 2030, and to reduce primary energy consumption by at least 35%.

In this regard, it places renewable energy and energy efficiency at the centre of the energy

transition.

2. GENERAL ENERGY POLICY

ENERGY INSIGHTS

The Just Transition Strategy includes measures to promote employment opportunities in

the energy transition, supported by a framework of vocational training, active labour

policies, support measures to the most vulnerable and economic stimulus plans for those

regions the most affected by the energy transition.

In line with Paris Agreement commitments and the European Green Deal, Spain’s Long-

Term Strategy (LTS) anticipates and plans the transition towards climate neutrality in the

2050 horizon, with a reduction of at least 90% in total GHG emissions by 2050 compared

to 1990. The document includes interim milestones for 2030 and 2040, seizing the benefits

derived from the energy transition and bolstering the transformation and competitiveness

of the economy. The LTS defines the path that will enable an almost completely

renewables-based energy system (including in the transport, buildings and economic

sectors). Following an initial public consultation in April 2019 and a draft presentation in

July 2020, the LTS went through a second public consultation from July to September

2020, and was adopted by the Council of Ministers in November 2020. It will be reviewed

every five years.

The National Energy Poverty Strategy 2019-2024 was approved in 2019 as the instrument

to approach and analyse the energy poverty concept from a comprehensive perspective

for the medium and long term. This strategy includes a definition of energy poverty and

uses four indicators to measure the degree of energy poverty and its evolution:

1) percentage of households in which energy expenditure (as a share of household

income) is more than double the national average; 2) percentage of households in which

absolute energy expenditure is less than half the national average; 3) inability to maintain

dwellings at adequate temperatures; and 4) delays in energy bill payments.

Post-COVID-19 recovery

Given that Spain was hit hard by the COVID-19 pandemic and associated lockdowns, the

government has already approved energy-related measures to help stimulate the

economy. In particular, Royal Decree-Law 23/2020 from June 2020 includes measures to

advance energy storage, promote aggregation services in the electricity market,

encourage the formation of renewable energy communities, facilitate regulatory

sandboxes, stimulate demand management and sector coupling, as well as expand

electric vehicle charging infrastructure.

In the current post-COVID-19 context, the NECPs are expected to serve as the guiding

tool to direct the EU recovery plan’s actions, by frontloading the investments outlined in

the plan in the upcoming three years. In July 2020, EU leaders agreed to EUR 750 billion

in funding for recovery efforts. In order to receive support from the Recovery and

Resilience Facility, member states must prepare national recovery and resilience plans,

setting out their reform and investment agendas over the period 2021-26; funds must be

invested in the green and digital transformation.

Spain is currently working on its green recovery plan, as it will be one of the key

beneficiaries of EU recovery funds. Spain’s prime minister presented his government’s

plans for spending the EU recovery funds in early October. The Spanish government

expects to receive up to EUR 140 billion worth of grants and loans from the recovery funds,

out of which it plans to spend EUR 72 billion in the first three years (2021-23); of this

amount, over 37% is targeted for green investments. This will be supplemented by

EUR 27 billion from Spain’s national 2021 budget.

2. GENERAL ENERGY POLICY

The main areas defined in the initial draft of Spain’s Recovery and Resilience Plan for the

energy transition are efficiency, sustainable mobility, renewable energies, electricity

infrastructure, storage and flexibility, green hydrogen, and the just transition.

Energy efficiency

Spain’s overall energy strategy employs an “efficiency first” principle. Its energy efficiency

objectives are aligned with EU Energy Efficiency Directives, which establish a common

framework of measures to promote energy efficiency within the European Union, with

EU-wide targets of a 20% improvement in 2020 and 32.5% in 2030 (relative to 2005

levels). Spain assumes these objectives and establishes, in the NECP, a national guideline

for energy efficiency of 24.2% (excluding non-energy uses) by 2020, and by 2030, a

national indicative energy efficiency target of 39.5%. The reduction in primary energy

consumption proposed in the NECP is equivalent to 1.9% every year since 2017, which

when linked to an expected increase in GDP in the same period of around 1.7% will result

in an improvement in the primary energy intensity of the economy of 3.5% per year until

2030, which would be well above the IEA average over the last decade.

The National Energy Efficiency Fund was created in 2014 and is the main instrument to

implement measures for financial and economic support, technical assistance, training and

information, and other measures to increase energy efficiency across all sectors. It is

mainly financed by contributions from wholesale petroleum operators as well as natural

gas and electricity trading companies.

The NECP proposes 17 measures to meet the targets, 10 of which were designed along

a sectoral approach. Allocation of targets and funding for energy efficiency is granted

proportionally to the energy consumption of each sector, with transport receiving the

largest share. As such, the transport sector stands out in the NECP, with four measures,

followed by the industrial and residential sectors. The tertiary and agriculture and fishing

sectors represent the lowest contributions.

Given that the transport sector is the largest energy-consuming sector in Spain, accounting

for 38% of final consumption in 2019, the government has placed a particular focus on

reducing fuel consumption in the sector through a range of policies, including: promoting

modal shifts from road to rail and to bicycles, walking, public transit and shared vehicles;

increasing the use of advanced biofuels; renewing the vehicle fleet; and putting 5 million

electric vehicles on the road by 2030 (supported by a buildout of electric charging

infrastructure). The NECP establishes a target to source 28% of transport fuels from

renewables, which will mainly consist of biofuels and renewable electricity, well above the

14% required by the EU for 2030.

Electricity transition

Renewables

Spain’s renewable energy policy is aligned with EU 2020 targets, which set a binding

national target for renewable energy equal to 20% of gross final consumption of energy

(including 10% in transport). Spain’s targets on renewable energy for 2020 and the policies

and measures to meet them were initially laid out in the National Renewable Energy Action

Plan 2011-2020, which set a national 2020 target of 20.8% of renewable energy in gross

final energy consumption. Spain expects to reach a 20% share of renewables in gross final

energy consumption in 2020, up from 18.4% in 2019.

2. GENERAL ENERGY POLICY

ENERGY INSIGHTS

Spain is now focused on its 2030 targets. Overall, Spain’s NECP expects to achieve a

42% share of renewables in total end use of energy by 2030. This level will be led by the

power sector, where the plan projects the installation of nearly 60 gigawatts (GW) of new

renewable generation through 2030, led by wind and solar, amounting to 74% of total

electricity generation that year. This will put Spain on a pathway toward achieving its 2050

objective to source 100% of its power from renewable sources, in line with its 2050

carbon-neutrality goal.

To achieve its ambitious targets for renewables in electricity, Spain envisions a

three-pronged strategy: 1) the promotion of large generation projects; 2) the deployment

of own consumption and distributed consumption; and 3) measures to integrate

renewables into the electricity system and market. The NECP 2021-2030 considers

auctions to be the main tool for the development of these technologies, in accordance with

EU Directive 2018/2001 on the promotion of the use of energy from renewable sources.

In addition, the NECP includes planned measures to adapt electrical networks for the

integration of renewables by revising transmission and distribution network planning

through the creation of new transmission nodes and the strengthening of existing ones, as

well as the development of new international interconnections and underwater lines.

Grid codes are also expected to be updated to keep up with changing technological

developments and digitalisation, as is the definition of network connection capacity. The

government is also in the process of developing a national strategy for storage and in 2020

already issued new regulations to support the integration of storage technologies into

electricity systems. Similarly, regulations are also pending to increase the role that

demand-side management will play, including through the promotion of aggregation

services.

Coal phase-out

As part of its climate change and energy transition agenda, Spain has a plan to phase out

the use of coal in its energy sector. However, unlike in some countries that have imposed

specific mandates for the industry to shut down coal-fired generation capacity, Spain

expects that market conditions will drive coal closures.

The NECP expects that up to 9 of Spain’s existing 15 coal-fired power plants (as of 2019)

will no longer be operational by 2021. Already, based on market conditions, on 30 June

2020, eight plants with around 4.6 GW of capacity shut down and four more are expected

to follow by 2022. By 2030, Spain expects that coal-fired power plants will no longer be

competitive and coal will be fully phased out of the power sector. Accordingly, the

government plans to offer support measures to affected regions to help them adjust to the

transition.

Nuclear phase-out

Spain’s NECP also foresees an orderly and staggered closure of the country’s nuclear

power plants within the 2027-35 time frame. Nuclear plants are already facing financial

difficulties, in part due to high levels of taxation. The planned retirements of Spain’s

existing fleet of seven reactors (7.4 GW of installed capacity) will begin in 2027, and

by 2030, around 4 GW of installed nuclear capacity is planned for orderly shutdown.

Following the coal and nuclear closures, natural gas-fired generation will become the

predominant source of dispatchable power in Spain’s electricity system to balance out the

growth in variable renewables generation.

2. GENERAL ENERGY POLICY

Energy system transformation

Beyond the electricity sector, the government plans to expand self-consumption of

renewables and distributed generation, as well as promote the use of renewables in the

industry and heating sectors. It also has plans to support the production of advanced

biofuels and renewable gases, as well as hydrogen.

Overall, Spain plans to move toward a full energy system transformation, the foundations

of which will be laid in the coming decade. The LTS projects that the electrification of the

economy will be over 50% by 2050, with 250 GW of new renewable energy capacity.

The power sector is planned to evolve from one characterised by centralised generation

based on base load and peak demand needs with mostly passive demand to a new model

marked by variable, decentralised, intelligent and interconnected generation. The new

system is expected to be supported by large-scale storage and demand-side management

to ensure system flexibility, while new technology, such as electric vehicle charging

infrastructure, will be smartly integrated to enable improved demand and network

management.

In order to integrate more renewables into other sectors of the economy, the government

has a four-pronged strategy: 1) energy efficiency first; 2) renewables-based electrification;

3) storage; and 4) indirect electrification through renewable gases, mainly hydrogen. The

promotion of renewable gases is a critical measure outlined in Spain’s NECP, with uses

planned in mobility, industry, seasonal storage and synthetic fuels. In order to plan its

strategy for renewable gas, the government is in the process of estimating the domestic

production potential and demand, and believes that its generous renewable resource

endowment will offer a competitive edge in this space.

To this end, the government has several initiatives underway to jumpstart plans and

investments in the 2030 time frame, including a Hydrogen Roadmap, a Biogas Roadmap,

an Offshore Wind Roadmap, a self-consumption strategy public consultation and a smart

meter evolution public consultation.

To align with its strategy to promote electrification, in December 2020 the government

issued the draft Law on establishing the National Fund for the Sustainability of the Electric

System. The policy would reallocate the levies associated with subsidies for renewables,

co-generation and waste – currently borne entirely by electricity consumers – to energy

companies across the energy system (oil, gas and electricity companies based on annual

sales volumes).

Energy security

Spain is almost entirely reliant on imports for oil and gas, though its sources and routes for

imports are diversified. For crude oil, Spain’s imports reflected a variety of countries and

regions in 2019, including Nigeria, Mexico, Saudi Arabia, Libya, the Islmaic Republic of

Iran and Iraq, while oil products came from Morocco, Italy, Gibraltar, France and Algeria,

among others. Moreover, Spain enjoys a unique oil infrastructure system with wide

geographic and interconnecting coverage, including an extensive network of pipelines and

storage capacity connected to refineries.

2. GENERAL ENERGY POLICY

ENERGY INSIGHTS

Similarly, Spain’s imports of natural gas in 2019 were sourced from a range of countries,

including Algeria, Qatar, Nigeria, the United States and the Russian Federation, both in

the form of pipeline gas and liquefied natural gas (LNG). In fact, diversification of natural

gas supply sources is a requirement for gas suppliers under Spanish law to avoid

overdependence on a given country.

As the Spanish policy agenda shifts its focus toward a future energy system that is based

around renewable energy, new benefits and challenges will emerge with respect to energy

security. Mainly driven by energy efficiency measures and a reduction in oil consumption,

the government expects that its import dependency will fall from 73% in 2017 to 61%

in 2030. The change is projected to result in savings on fossil fuel imports of

EUR 13.3 billion in the year 2030.

At the same time, the overhaul of the power sector – away from coal and nuclear

generation towards variable renewable sources – will increase the role that dispatchable

gas-fired generation will play in the electricity system. As gas plant operators face possible

financial challenges due to low load factors, ensuring sufficient gas backup capacity in the

system is becoming a more pressing matter, and one the Spanish government is currently

studying, including through the possibility of introducing a capacity mechanism. Moreover,

the energy security role that coal plants previously provided – notably through a

requirement to store fuel on site – will need to be provided through other means, including

by introducing more flexible resources into the system.

In addition, interconnections with neighbouring countries are also being expanded to help

integrate the sizeable expected capacity of variable renewables generation. New

interconnection capacity is under construction or planned with both France and Portugal,

though Spain will still fall short of its EU interconnection target of 10% by 2020 and 15%

by 2030. In particular, existing interconnection with France is often congested and new

projects have been stalled or delayed.

Lastly, an economic shift toward electrification across sectors and an associated rollout of

digital infrastructure will require an increased focus on cyberthreats. Already, the Spanish

government completed a rollout of smart meters to end users by the end of 2018; Spain’s

main energy strategy documents point toward sizeable new investments in digitalisation

across the energy space, with particular prominence in the electricity sector.

Pricing and taxation

Spain’s energy taxation system is centred on a value-added tax, with a rate of 21% for the

consumption of energy products, as well as additional special taxes that include: a tax on

hydrocarbons, a special tax on coal and a special tax on electricity. The special tax on

electricity is transferred to the regions and can be applied to fund renewable energy

support programmes. The government also offers lower registration taxes for the purchase

of electric vehicles, tax benefits for the use of electricity in the shipping sector, property

and construction tax rebates for buildings with solar facilities, an exemption to the

hydrocarbon tax for fuel used in power plants or co-generation facilities, and an exemption

to the special tax on electricity for renewable energy producers with 50 MW or less of

installed capacity.

2. GENERAL ENERGY POLICY

Autonomous communities, within the scope of their regulatory powers, also apply taxes

that impact energy policy, such as a tax deduction in the Murcia region for the installation

of renewable energy resources in homes or a tax deduction in the La Rioja region for the

purchase of a new electric vehicle. Overall, electricity taxes in Spain remain relatively high,

notably compared to taxation levels for oil and natural gas.

Spain has no carbon-based taxation, only the Emissions Trading System (ETS)-related

costs for industry and power plants. There is no carbon tax applied in non-ETS sectors.

However, in February 2019, the Spanish government published the “Change Agenda” to

align its strategies with the United Nation’s 2030 Agenda for Sustainable Development.

The document notes the need for a “new green taxation” that is aligned with environmental

impacts. Moreover, the NECP includes an action line to analyse and develop the best

taxation system for a low-carbon and resilient economy.

Spain recognises its relatively low levels of environmental taxation within the EU. Different

assessments and studies to introduce environmental taxation in different sectors have

been carried out in recent years, with an eye to citizen acceptance. Such taxation would

effectively support the implementation of the NECP’s measures by internalising

environmental costs and accelerating the transformation to a low-carbon economy.

Nonetheless, advancing environmental taxation is also challenging due to the need to

reach a consensus among the different autonomous communities with competencies for

certain taxes. Furthermore, it implies challenges in the implementation and management

of the mechanisms for tax collection.

Assessment

Since the last in-depth review in 2015, Spain has solved the tariff deficits for electricity and

was able to close its coal mines, which allowed it to prioritise the issue of climate change

on its national agenda and align its goals with EU objectives and ambitions. In doing so,

Spain has placed the energy transition at the forefront of its energy and climate change

policies.

Spain brought its energy policy in line with the EU’s strategy for a carbon-neutral economy

by 2050. To achieve 2050 carbon neutrality, the Spanish framework for energy and climate

change is centred on the massive development of renewable energy (particularly solar and

wind), energy efficiency, electrification and renewable hydrogen. According to the

government, this provides an opportunity to stimulate the economy, create jobs, modernise

industry, enhance competitiveness, support vulnerable groups, improve energy security,

and support research and innovation.

The NECP is the backbone of Spain’s climate and energy policy. It outlines a number of

policy actions that will support the country’s 2030 climate targets, including in the areas of

energy efficiency, renewables and transport. Its targets include: a 23% reduction in GHG

emissions from 1990 levles; a 42% share of renewables in energy end use; a 39.5%

improvement in energy efficiency (compared to 2005 levels); and a 74% share of

renewables in electricity generation. Spain’s ambitious targets and detailed policy plans

are highly commendable and will place it well on track toward an energy transition in the

coming decades. Notably, the NECP outlines a number of measures at the sectoral level

for the power, transport, residential and commercial, industry, and agricultural sectors that

2. GENERAL ENERGY POLICY

ENERGY INSIGHTS

will serve as the building blocks of the pathway to its 2030 targets. At the same time, the

government should be mindful of the high costs associated with the plan and ensure

thorough assessments of action items, to take advantage of the most cost-effective

solutions.

On the domestic front, along with the NECP, the Spanish government issued the Climate

Emergency Declaration in January 2020, which outlined 30 action areas to reach the

climate neutrality goal by 2050. Its three pillars are: the Climate Change and Energy

Transition Law, the Just Transition Strategy, and the Long-Term Strategy. A supplemental

National Energy Poverty Strategy was also issued.

The draft Law on Climate Change and Energy Transition, approved by the government in

May 2020 and currently under debate in parliament, places the fight against climate

change and the need for an energy transition at the centre of the economy and society,

and provides a framework for policies to achieve carbon neutrality by 2050. Its targets are

closely aligned with those in the NECP. The draft law calls for: at least a 20% reduction in

GHG emissions by 2030 (from 1990 levels); 70% of electricity sourced from renewables;

a 35% reduction in primary energy consumption (compared to 2005 levels); and a 35%

share of renewables in energy end use. Though the targets serve as a minimum baseline

and are not incompatible with the headline targets in the NECP, harmonisation of the

targets could further improve clarity around objectives and guide investment plans.

The Just Transition Strategy includes measures to promote employment opportunities in

the energy transition, supported by a framework of vocational training, active labour

policies, support measures to the most vulnerable, and economic stimulus plans for those

territories most affected by the energy transition. As Spain is already on track to phase out

coal from its electricity mix, the strategy will be particularly important for assisting coal

communities to cope with the energy transition.

Finally, the LTS anticipates and plans the transition towards climate neutrality in the 2050

horizon, with a reduction of at least 90% in total GHG emissions by 2050 compared to

1990 levels. The LTS defines the path that will enable an almost completely renewables-

based energy system (including in the transport, buildings and industry sectors). Following

a public consultation that was completed in September 2020, the Council of Ministers

adopted the LTS on 3 November 2020.

Once all of the plans and strategies mentioned above are implemented, a completely

different energy sector will emerge, where fossil fuels no longer dominate and end-user

sectors are mostly electrified. Such a new energy landscape will come with new challenges

and will provide new opportunities. The challenges concern energy security. The current

system is backed up by massive stocks of oil, gas and coal that can be dispatched in a

flexible way; the new system, with a large share of variable renewable generation, will

require other forms of longer term backup, on top of short-term flexibility stemming from

batteries, pumped hydro and demand response, among others. New vulnerabilities will

also arise, as electrification goes hand-in-hand with smartening of the system and

digitalisation. Special attention should be given to analysing the potential new hazards and

incidents that can affect security of supply.

The opportunities are with energy system integration. The new energy system can be

much more efficient than the current one, as end-use sectors can be coupled with higher

electrification, the use of residual heat, waste to energy, but also use electricity to produce

renewable gases like hydrogen, among others. Spain, like other countries, has only begun

2. GENERAL ENERGY POLICY

to explore these opportunities, which can be stimulated by targeted RD&D policies. It is

also important to adapt the regulatory framework, where needed, to gradually shape such

a new integrated energy system.

Spain is progressing towards its 2030 targets, notably in the electricity sector. After a slump

in investments between 2013 and 2018 due to a lack of financial means to promote

renewables, investments took off again in 2019. The share of renewables (including

non-renewable waste) in the national electricity mix increased from 24% in 2009 to 38%

in 2019. As such, Spain is on track to meet its 2020 target to source 42% of its electricity

from renewables.

Though Spain’s progress on ramping up renewables in its electricity mix is commendable,

the future trajectory of its power mix warrants careful consideration to ensure a smooth

transition. To start, Spain plans to phase out both coal and nuclear power generation. The

coal phase-out appears well on track, with coal only providing around 5% of electricity

generation in 2019 and even less in 2020. Nuclear power, which accounted for 22% of

power generation in 2019 (and is an important source of low-carbon generation), will begin

shutting down in 2027. Four of Spain’s seven nuclear reactors are scheduled to close by

the end of 2030, representing around 4 GW of capacity. Natural gas plants provided 31%

of power generation in 2019, and will be crucial to balancing out a power system that is

heavily dependent of variable renewables once coal and nuclear have left the market. As

such, the government will need to pay special attention to prevent natural gas generation

capacity from simultaneously exiting the system. In this regard, the government should

thoroughly assess the cost implications for consumers of the expedited phase-out of both

coal and nuclear generation.

Spain’s targets also preview a sizeable buildout of new renewables capacity to reach 74%

of electricity generation by 2030, notably wind and solar. As such, a stable, long-term

remuneration framework for supporting the growth of renewables, including for storage,

will be essential. Spain’s updated auction mechanisms are a step in the right direction, and

investor sentiment and availability of financing appears on track. Additional help could

come in the form of expedited permitting and timely issuance of auction schedules and

terms to improve investment clarity.

Moreover, the trajectory will require a concerted focus on system integration of variable

renewables in the coming years, a topic for which the Spanish government has already

developed a strategy. The government’s strategy is centred on interconnections, storage,

demand-side management and digitalisation. Public consultations and regulatory

proceedings are underway in all of these areas, though a timely issuance of a regulatory

framework will be crucial for mobilising investments, including in next-generation

technologies such as biogas and hydrogen. Co-operation with neighbouring governments

on interconnection capacity will also be a key element of utilising Spain’s full production

capacity on renewables, notably with France to expand connection of the Iberian peninsula

with the rest of continental Europe.

The issue of digital security is becoming an increasingly pressing problem for modern

energy systems, and cyberthreats are even more likely in a period of increased use of

remote connections. Energy automation systems and controlling software may become

the target of cyberattacks, especially in a period of accelerated energy transition when the

share of individual energy sectors and their role in the system evolves over a short period

of time. All possible risk-reducing measures like threat intelligence, vulnerability analyses,

2. GENERAL ENERGY POLICY

ENERGY INSIGHTS

adequate planning and awareness training along the supply chain will likely be

cost-effective and fairly easy to implement.

Notwithstanding its considerable progress to date on decarbonising and increasing the

share of renewables in the electricity sector, Spain’s total energy mix is still heavily

dominated by fossil fuels. Oil and gas provide 42% and 25% of total energy supply,

respectively. Notably, the transport, industry and buildings sector all have considerably

more work ahead to meet the country’s targets for renewables penetration and

decarbonisation.

The transport sector, in particular, is the single biggest emitter of CO

emissions,

accounting for nearly 41% of total CO

emissions in 2019. This makes it a priority sector

for the government, which aims to have 5 million electric vehicles on the roads by 2030 in

addition to increasing the use of advanced biofuels. Given the relatively low penetration of

electric vehicles on Spanish roads (less than 100 000 currently) and the task of building

sufficient charging infrastructure, the target is ambitious, as is the overall target to source

28% of transport fuels from renewables (including renewable electricity) by 2030, from

5.4% in 2019. Plans for decarbonising the transport sector also include modal shifts, which

will also require sizeable outlays on new infrastructure and a shift in public behavioural

preferences.

In all sectors, Spain’s energy transition objectives hinge heavily on reducing consumption.

Already, Spain has begun to decouple economic growth from energy consumption; the

ratio of total consumption to GDP decreased by 15% between 2009 and 2019. Still, more

reductions will be needed across all sectors.

The draft Law on Climate Change and the Energy Transition as well as the NECP outline

a number of measures to improve efficiency and reduce consumption in all economic

sectors, including transport, buildings and industry. The policy plans are extensive and can

achieve good results, but will need to be accompanied by a predictable, long-term

regulatory framework; sufficient incentives to mobilise private investments; and adequate

public financing to underpin all of the programmes over the coming decade. Moreover,

Spain should pay due consideration to alternative measures in the event that some

assumptions, such as the EU Emissions Trading System price-driving sufficient

decarbonisation efforts by industry, do not pan out.

Under Spain’s plans, allocation of targets and funding for energy efficiency is granted

proportionally to the energy consumption of each sector, with the largest share going to

transport. A prioritisation of measures within sectors based on cost-effectiveness would

help Spain achieve its targets more effectively. In addition, implementation of a number of

efficiency measures for transport, buildings and industry will fall on municipal governments,

making co-ordination between the central government and municipal administrations as

well as skills capacity at both levels of government essential to success. Additional effort

and funding for capacity building at all levels of government toward this end would be

helpful.

Spain was hit hard by the COVID-19 pandemic in 2020. It declared a state of emergency

between 14 March and 20 June 2020, during which energy demand dropped considerably.

Petroleum products demand fell most significantly, by 60% compared to the same period

in 2019, while total electricity demand fell by 12.7% and natural gas demand fell by 15.5%.

2. GENERAL ENERGY POLICY

Although demand has recovered since the easing of the lockdown measures, the country

is now facing the economic aftermath of the pandemic. Spain is currently working on a

recovery plan, as it will be one of the key beneficiaries of EU recovery funds through the

Recovery and Resilience Facility, which are meant to be invested in the green and digital

transformation. To this end, Spain’s National Recovery and Resilience Plan represents an

important opportunity to accelerate measures included in its NECP and draft Law on

Climate Change and Energy Transition. In particular, it will enable a greater outlay of public

investment to jumpstart the NECP and guide timely private investment in these areas. As

such, the government should promptly finalise specific guidelines on priority areas for

spending within its energy and climate plans.

Spain has a fairly decentralised governance system, which is divided into 17 autonomous

communities, each with its own parliament. This gives great importance to how the central

government interacts with these regions and their representatives, who have competence

to implement key national energy and climate policies. In the energy sector, the

autonomous communities are responsible for areas such as authorising power plants and

energy networks. The decentralised governance system has benefits, as regions and

municipalities can work more directly with end users to promote changes in energy

consumption and transport. However, problems can also arise from the difference in

approaches and standards between regions and can result in uneven implementation of

measures across regions. Improved training for municipal and regional authorities and

standardisation of tendering processes would help improve outcomes.

Prices and taxes are also critical elements to drive change in consumer behaviour.

Electricity bills, including taxes, in Spain remain relatively high, notably compared to

taxation levels for oil and natural gas. As Spain looks to a future of increased electrification

of end-use sectors and sector coupling – an essential element to achieve an energy

transition – the competitiveness of electricity against fossil fuels will be a critical element

to achieving the desired results. As such, Spain should consider changes to its taxation

system, notably to incorporate the cost of carbon into end-use prices, to reduce barriers to

increased uptake of clean electricity in more end uses. The recently announced National

Fund for the Sustainability of the Electric System is a significant step in the right direction

to redistribute electricity costs across the energy system to promote increased

electrification.

In October 2020, Spain issued its Hydrogen Roadmap for the development of renewable

hydrogen, in line with the European Hydrogen Strategy. The government should also issue

its planned road map in the area of biogas to ensure long-term clarity for investments that

further support sector coupling.

From an energy security perspective, although Spain continues to be heavily dependent

(73% dependency) on foreign sources for its energy, its sources for oil and gas are

relatively well diversified and the government has robust emergency response frameworks

in place in the case of a disruption. Notably, these frameworks are well integrated with

those in the IEA and the EU. The LTS projects that new policies and increased

electrification will reduce Spain’s import dependency to 10%. However, the rapid shutdown

of coal and nuclear facilities over the coming decade bears watching, as it could increase

the country’s call on natural gas, especially if new renewables capacity cannot be built as

quickly as planned.

2. GENERAL ENERGY POLICY

ENERGY INSIGHTS

Interconnectivity with other European countries is also a critical element for Spain to

improve security of supply. While electricity projects with Portugal are progressing, existing

interconnection with France is often congested and new projects have been delayed,

causing Spain to fall short of its EU interconnectivity targets of 10% by 2020 and putting

at risk its 15% target by 2030. Spain should consider expanding the scope of its

cross-border network planning today with an eye on the 2030 target. Importantly,

increased interconnections would also enable Spain to export surplus renewable electricity

and gas from its underutilised LNG import capacity.

Recommendations

The government of Spain should:

 Review taxation to avoid excess charges and distortionary impacts on electricity

relative to oil and gas consumption to promote electrification. Consider additional

carbon-based taxation as well as other mechanisms to progressively redistribute

electricity charges among all actors in the energy system.

 Use cost-effectiveness analysis for energy efficiency measures to better prioritise

financing for measures and achieve targets more effectively.

 Improve co-ordination with regional authorities and municipalities to implement the

NECP’s measures more effectively.

 Improve electricity interconnection capacity to boost security of supply and facilitate

further integration into the European energy market.

 Regularly review and strengthen when needed the energy system’s cyber resilience

by testing and simulating scenarios that involve cyberattacks along the value chains

of electricity, nuclear, gas and oil in collaboration with all stakeholders.

 Ensure that the National Recovery and Resilience Plan supports achieving the NECP’s

targets.

References

IEA (International Energy Agency) (2021), “World energy balances”, IEA World Energy

Statistics and Balances (database), www.iea.org/statistics.

OECD (2020), OECD Economic Outlook, Vol. 2020/1, https://doi.org/10.1787/0d1d1e2e-en.

OECD (2018), OECD Economic Surveys: Spain 2018, https://doi.org/10.1787/eco_surveys-

esp-2018-en.

ENERGY SYSTEM TRANSFORMATION

3. Energy and climate change

Key data

(201

GHG emissions with LULUCF*

(2018): 296.2 Mt CO

-eq, -27.4% since 2007, -15.2%

since

2000, +16.9% since 1990

GHG emiss

ions without LULUCF* (2018): 334.3 Mt CO

-eq, -25.3% since 2007, -14.0%

since

2000, +15.5% since 1990

Energy

-related CO

emissions:

emissions from fuel combustion: 230.9 Mt CO

, -31.7% since 2007, -17.1%

since

2000, +13.9%

since 1990

emissions by fuel: oil 60.8%, natural gas 30.7%, coal 7.3%, other 0.6%

emissions by sector: transport 40.6%, electricity and heat generation 23.3%,

industry

13.5%, other energy 9.2%, service 7.3%, residential 6.2%

intensity per GDP:** 0.13 kg CO

/USD (IEA:*** 0.21 kg CO

/USD)

* Land use, land

-use change and forestry (Source: UNFCCC).

** Gross domestic product in 2015 prices and purchas

ing power parity.

*** Weighted average of IEA member countries in 2018

Overview

Spain has set ambitious policies, in line with European Union (EU) requirements, to reduce

greenhouse gas (GHG) emissions. In January 2020, Spain submitted a ten-year National

Energy and Climate Plan (NECP) to the European Commission. The NECP sets a target

of reducing GHG emissions by 23% by 2030 compared to 1990 levels and achieving

climate neutrality by 2050.

In 2018, GHG emissions in Spain were 334.3 million tonnes of carbon dioxide equivalent

(Mt CO

-eq) (not including effects from land use) (Figure 3.1). This corresponds to a 25%

drop since 2007, mainly driven by the energy sector, compared to the highest level

reached in 2007 at 447.3 Mt CO

-eq. Since then, emissions in Spain began to fall

significantly as a result of the 2008-09 economic crisis. Emissions stopped declining

in 2013 and have remained relatively stable since at around 330 Mt CO

-eq. Over the

decades, land use, land-use change and forestry (LULUCF) has continuously contributed

as a carbon sink at around -37 Mt CO

-eq per year.

3. ENERGY AND CLIMATE CHANGE

Similar to most countries, the energy sector is the largest emitter of GHG emissions,

accounting for 76% of the total in 2018, followed by agriculture at 12%, industrial processes

at 8% and waste at 4%.

Figure 3.1 Greenhouse gas emissions in Spain by sector, 1990-2018

In 2018, total GHG emissions in Spain were 325 Mt CO

-eq, representing a 25% drop

compared to a peak in 2007. Spain set a GHG reduction target of 23% below 1990 levels

by 2030.

* Energy includes power and heat generation, services, households, industrial energy consumption, and transport,

and excludes indirect CO

Note: Mt CO

-eq = million tonnes of carbon dioxide equivalent.

Source: UNFCCC (2020), Spain 2020 National Inventory Report, https://unfccc.int/documents/228014

Energy-related CO

emissions

In 2019, energy-related CO

emissions in Spain amounted to 230.9 Mt CO

, a 31.7%

reduction from the peak in 2007 (Figure 3.2). Energy-related emissions fell significantly

following the 2008-09 global financial crisis, notably in electricity generation. Since 2013,

emissions have stopped declining in other sectors (industry, transport, residential).

The transport sector was the largest CO

emitter in 2019, accounting for 41% of total

emissions from fuel combustion, followed by electricity and heat generation (23%), industry

(14%), other energy (e.g. refineries, oil and gas extraction) (9%), services (7%), and

residential (6%). CO

emissions in the transport sector have continued to grow since 2013,

as Spain is largely dependent on road transport, based on a well-developed road transport

infrastructure. The second-largest CO

emitter, electricity and heat generation, had

increasing energy-related CO

emissions until 2007. Since then, emissions from electricity

and heat generation have been on a downward trend with fluctuations (dependent on

weather conditions) correlating with the increasing use of wind and solar energy to

generate electricity.

- 100

100

200

300

400

500

1990 2000 2007 2012 2013 2014 2015 2016 2017 2018 2030

Mt CO

-eq.

Target

Waste

Industry processes

Agriculture

Energy*

LULUCF

-23%

3. ENERGY AND CLIMATE CHANGE

ENERGY SYSTEM TRANSFORMATION

Figure 3.2 Energy-related CO

emissions in Spain by sector, 2000-19

Since peaking in 2007, energy-related CO

emissions have declined noticeably across all

sectors, but started to increase again in 2013.

* Services/other includes commercial and public services, agriculture/forestry, and fishing.

** Other energy industries include emissions from oil refineries, coke evens, coal mines, oil and gas extraction.

*** Industry includes CO₂ emissions from non-metallic minerals, chemical and petrochemical, iron, and steel.

Note: Mt CO

= million tonnes of carbon dioxide.

Source: IEA (2021), IEA CO

₂

Emissions from Fuel Combustion Statistics (database), www.iea.org/statistics.

Oil accounted for 61% of total energy-related CO

emissions in 2019, followed by natural

gas (31%) and coal (8%) (Figure 3.3). Emissions from oil consumption decreased from 2007,

and rebounded again from 2014 to 2018 due to increasing oil consumption in the transport

sector. They fell slightly again in 2019. Emissions from natural gas combustion also showed

a similar trend as oil during the economic crisis. Due to the increased share of gas in

electricity generation, emissions from natural gas combustion in 2019 more than doubled

compared to 2000. Coal emissions have fluctuated, depending on demand in electricity

generation, but have overall experienced a clear downward trend in recent years.

Figure 3.3 Energy-related CO

emissions in Spain by energy source, 2000-19

Oil and natural gas emissions declined between 2007 and 2014, but picked up again, while

emissions from coal have fluctuated depending on demand in electricity generation.

* Other includes emissions from non-renewable waste, which is not visible at this scale.

Note: Mt CO

= million tonnes of carbon dioxide.

Source: IEA (2021), IEA CO

₂

Emissions from Fuel Combustion Statistics (database), www.iea.org/statistics.

100

150

200

250

300

350

400

2000

2002 2004

2006 2008 2010 2012 2014 2016

2018

Mt CO₂

Electricity and heat

generation

Residential

Services/other*

Other energy industries**

Industry***

Transport

100

150

200

250

300

350

400

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Mt CO₂

Coal

Natural gas

Other*

Oil

3. ENERGY AND CLIMATE CHANGE

Carbon intensity

Energy-related CO

emissions in Spain significantly decreased from 2007 to 2013, driven

by reduced economic activity (GDP per capita dropped by 10% over the same period)

(Figure 3.4). While GDP per capita rebounded again from 2013 onwards, the carbon

intensity of the economy (CO

/GDP PPP) has consistently declined, showing signs of a

decoupling effect. However, the carbon intensity of the energy mix (CO

/TFC) has

remained stable since 2010.

Figure 3.4 Energy-related CO

emissions and key drivers in Spain, 2000-19

Despite population and economic growth, energy-related CO

emissions have been trending

downward over the last two decades, thanks to a drop in the carbon intensity of the economy.

* GDP refers to real gross domestic product in USD 2015 prices and purchasing power parity (PPP).

Notes: TFC = total final consumption. CO

emissions refers to energy-related CO

emissions from combustion

processes.

Source: IEA (2021), IEA CO

₂

Emissions from Fuel Combustion Statistics (database), www.iea.org/statistics.

From 2000 to 2007, Spain’s carbon intensity of the economy, measured as energy-related

emissions per unit of GDP, remained relatively high, at around 0.21 kg CO

/USD PPP

(Figure 3.5). However, it showed a rapid decline of 25% between 2007 and 2010, driven

by a reduction in electricity and heat production (EEA, 2020). In 2019, Spain’s carbon

intensity per GDP was 0.13 kg CO

. Compared to other IEA member countries, Spain is

in the lower half, 30% below the IEA weighted average (0.21 kg CO

/USD PPP in 2018)

and just below the weighted average among European IEA countries (0.15 kg CO

/USD

PPP in 2018).

In 2019, Spain emitted 198 grammes of CO

per kilowatt hour (g CO

kWh) for electricity

and heat generation, which was just below the weighted average of European IEA

countries (267 g CO

kWh in 2018) (Figure 3.6). Since 2000, the CO

intensity of electricity

and heat generation has continuously declined due to the increasing share of renewables

in electricity and heat generation.

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Index 2000

GDP/capita

Population

CO2/TFC

CO2 emissions

CO2/GDP (PPP)

emissions

/TFC

/GDP (PPP)

3. ENERGY AND CLIMATE CHANGE

ENERGY SYSTEM TRANSFORMATION

Figure 3.5 CO

intensity in Spain and selected IEA member countries, 2000-19

In 2019, Spain’s CO

intensity of the economy had fallen by 40% from the highest level

in 2005, which is just below the weighted average of European IEA countries.

* IEA Europe refers to a weighted average of European IEA member countries. 2019 data are not available yet for all

countries.

Notes: kg CO

= kilogrammes of carbon dioxide. GDP refers to real gross domestic product in USD 2015 prices and

purchasing power parity (PPP).

Source: IEA (2021), IEA CO

₂

Emissions from Fuel Combustion Statistics (database), www.iea.org/statistics.

Figure 3.6 CO

intensity of electricity and heat generation in Spain and selected IEA

member countries, 2000-19

Since 2000, Spain’s CO

intensity in electricity and heat generation has significantly fallen by

55%, with large fluctuations, mainly driven by variations in coal and natural gas.

* IEA Europe refers to a weighted average of European IEA member countries.

Note: g CO

/kWh= grammes of carbon dioxide per kilowatt hour.

Source: IEA (2021), IEA CO

₂

Emissions from Fuel Combustion Statistics (database), www.iea.org/statistics.

Institutional responsibilities

Spain has improved its institutional co-ordination on climate change in recent years.

Since 2018, the Departments of Energy, Climate Change and Environment have been

integrated into a single ministry, the Ministry for the Ecological Transition and the

Demographic Challenge. The new ministry is tasked with co-ordinating and implementing

0.08

0.10

0.12

0.14

0.16

0.18

0.20

0.22

0.24

kg CO₂/USD GDP PPP

IEA Europe*

Italy

Spain

Portugal

France

100

200

300

400

500

600

gCO2/kWh

Italy

Portugal

IEA Europe*

Spain

France

g CO

/kWh

3. ENERGY AND CLIMATE CHANGE

the country’s climate plan and long-term decarbonisation strategy, mainly through a

working group of experts from different ministries. Additional governance improvements

are also addressed in the Bill on Climate Change and Energy Transition.

For administration of the implementation of the EU Emissions Trading System (ETS), the

central government (led by the Ministry for the Ecological Transition and the Demographic

Challenge) oversees the free allocation of allowances, auctions and the registry of

companies, while the autonomous communities (regional governments) oversee

permitting, monitoring and reporting and, in most cases, the infringement regime.

A Climate Change Policy Coordination Commission and the Climate Change Council

co-ordinate actions between the federal and regional governments as well as other

stakeholders.

Emission targets and strategy

Since the last in-depth review in 2015, Spain has prioritised the issue of climate change

on its national agenda, bringing it in line with EU objectives and ambitions. Since 2018,

the government has focused on the concept of a “just transition”, quickly moved to abolish

what was popularly known as the “sun tax” on rooftop solar installations, and reached an

agreement with the coal industry and unions to close all non-competitive coal mines in the

country. It also introduced a new climate package in early 2019 that included a number of

new measures and updated targets to meet its climate objectives.

The EU and its member states, including Spain, share a joint nationally determined

contribution under the United Nations Framework Convention on Climate Change process,

which includes a binding target of a net reduction of at least 55% in GHG emissions by

2030 compared to 1990 levels. Furthermore, the EU has also committed to achieving

climate neutrality by 2050.

As a member of the EU, Spain’s climate policy is guided by the framework of EU climate

policies: the 2020 climate package and the 2030 climate framework. Large combustion

facilities in the power and industry sectors are part of the EU ETS, whereas non-ETS

emissions are subject to the Effort Sharing Decision (ESD) until 2020 and the Effort

Sharing Regulation (ESR) until 2030 (see below).

Several policy documents guide Spain’s climate change strategy, namely: the Long-Term

Strategy to 2050, the National Energy and Climate Plan to 2030, the Bill on Climate

Change and Energy Transition for 2030 and 2050, and the Second National Adaptation

Plan.

Long-Term Strategy

The Long-Term Strategy (LTS) maps out a plan for Spain to achieve carbon neutrality

by 2050. The document includes interim milestones for 2030 and 2040, seizing the

benefits derived from the energy transition with an eye to the transformation and

competitiveness of the economy. The LTS defines the path that will enable an almost

completely renewables-based energy system. Specifically, it expects Spain’s

carbon-neutral economy to source 100% of electricity from renewable sources and 97%

of final energy consumption from renewables in 2050.

3. ENERGY AND CLIMATE CHANGE

ENERGY SYSTEM TRANSFORMATION

Its components include mitigation actions related to energy efficiency and renewables, as

well as strategies for adaptation and the decarbonisation of different sectors, including

electricity, mobility, industry and buildings. Measures outlined in the LTS include:

mobilisation of investment in green innovative technologies, transition to sustainable

mobility by means of electrification and use of renewable fuels, increased sustainability in

the building sector, efficiency improvements in the agricultural sector, and increased use

of natural carbon sinks, among others.

Reducing absolute levels of energy consumption is one of the central tenets of the LTS. It

projects primary energy consumption to fall by around 30% from 2020 to 2050. By 2050,

60% less energy would be necessary to create one unit of GDP compared to 2015. This

means that today’s primary energy consumption of about 120 million tonnes of oil

equivalent (Mtoe) would fall to 100 Mtoe in 2030 and to approximately 90 Mtoe in 2040

and less than 80 Mtoe in 2050.

In order to meet emissions reduction targets, renewable energy is expected to account for

28% of final energy use in the transport sector in 2030 and 79% in 2050 (including the

aviation sector). In the heating/cooling sectors, renewable energy is expected to account

for 97% by 2050 due to the use of heat pumps, biomass, renewable hydrogen and solar

energy.

According to the LTS, the sectors of the economy that would reduce their emissions most

in absolute terms by 2050, achieving climate neutrality, are the following:



electricity generation, 57 Mt CO

-eq reduction (100% from 2020)



mobility and transport, 85 Mt CO

-eq reduction (98% from 2020)



residential, commercial and institutional sectors, 28 Mt CO

-eq reduction (100% from 2020)



industry, 65 Mt CO

-eq reduction (90% from 2020).

Moreover, around 10% of the remaining GHG emissions in 2050 (37 Mt CO

-eq) are

expected to be absorbed by natural carbon sinks.

The LTS was approved by the Council of Ministers in November 2020. It will be reviewed

every five years. Several regional governments, including Catalonia, Galicia and Basque

Country, have already committed to net-zero targets by 2050 as well.

National Energy and Climate Plan

The measures provided for in Spain’s NECP 2021-2030, submitted to the EU in February

2020, target a 23% reduction in GHG emissions in 2030 compared to 1990 levels. The

latest inventory shows that as of 2018, Spain’s GHG emissions were 15.5% above 1990

levels (not including LULUCF), indicating that sizeable cuts are needed in the coming

years to meet the country’s and the EU targets (Spain was permitted a 15% increase in

emissions under the EU’s Kyoto Protocol plan for 2020) (EEA, 2019). Spain expects that

non-ETS sectors will contribute to achieving this target with a 39% reduction by 2030

compared to 2005 levels, while ETS sectors will contribute with a decrease of 61%

compared to 2005 levels.

The NECP adopts a strategy for reducing GHG emissions that places “energy efficiency

first”, with a planned 39.5% improvement in energy efficiency (or 3.5% annual reduction in

primary energy intensity) by 2030. The strategy includes measures to improve energy

efficiency in buildings through renovations and to reduce fossil fuel consumption in the

3. ENERGY AND CLIMATE CHANGE

transport sector (see Chapter 4). It also calls for expanding Spain’s use of renewables to

reach 42% in energy end use, especially solar and wind (EC, 2020).

As a critical part of the penetration of renewables, Spain aims to achieve a 74% share of

renewables in electricity generation by 2030. The decarbonisation of the electricity sector

will be facilitated by an expected phasing out of coal-fired generation and a high

penetration of renewables, which will also allow for the decommissioning of 4 gigawatts

(GW) of nuclear capacity by 2030. The NECP expects that up to 9 of Spain’s existing

15 coal-fired power plants (as of 2019) will no longer be operational by 2021. Already,

based on market conditions, on 30 June 2020, seven plants with around 4.6 GW of

capacity shut down and four more are expected to follow by 2022. By 2030, Spain expects

that coal-fired power plants will no longer be competitive based on an EU ETS price of

EUR 35/t CO

, along with continued cost reductions for renewables technologies and

relatively low prices for natural gas.

In the transport sector, the NECP plans to achieve emissions reductions through a modal

shift away from conventional internal combustion vehicles toward public, shared and

low-emissions modes of transport. Moreover, the government will designate low-emissions

zones in cities with more than 50 000 inhabitants starting in 2023, where access for the

most highly emitting vehicles will be restricted. As a result of the implementation of modal

shift measures, it is estimated that 35% of passenger-kilometres that are currently travelled

by conventional vehicles will shift to non-emitting forms of transport by 2030. Moreover,

the government projects 5 million electric vehicles on the roads by 2030, including cars,

vans, motorcycles and buses, as well as higher use of advanced biofuels in conventional

combustion vehicles.

For the industry sector, planned emissions reductions are expected from changes in the

fuels used in combustion processes, as well as the continuation of energy efficiency

improvements. In the longer term, to 2050, the decarbonisation of industry will require new

technological advances that will come from research, innovation and competitiveness

policies (see Chapter 6).

From a financial perspective, the government anticipates that the implementation of the

NECP will require EUR 241.4 billion, of which 80% is expected to come from the private

sector. Renewables will lead with 38% of investment, followed by efficiency at 35%, and

grid and electrification at 24%.

The NECP also takes stock of the interactions between air quality and emissions policy,

from both a policy and methodological point of view. Emissions of several air pollutants

have fallen over the last few decades, but air quality remains a concern, particularly

concentrations of nitrogen dioxide (NO

). Personal transport and traffic congestion

exacerbate problems with air quality in major metropolitan areas (namely, Madrid and

Barcelona), leading to health and economic costs. To this end, Spain’s projections of GHG

and air pollutant emissions have been developed in a consistent way and the NECP makes

a link with plans included in the National Air Pollution Control Programme. Benefits to air

pollution and public health of the proposed climate and energy measures create value

added to the plan.

3. ENERGY AND CLIMATE CHANGE

ENERGY SYSTEM TRANSFORMATION

Bill on Climate Change and Energy Transition

The government declared a “climate emergency” in January and pledged to reintroduce a

draft Bill on Climate Change to parliament within its first 100 days in office, though that

was delayed by the COVID-19 pandemic.

The Bill on Climate Change and Energy Transition was accepted by the government in

May 2020 and submitted to parliament. It will transpose much of the NECP into national

law, though the NECP’s main targets are also binding at the national level, in line with EU

Regulation 2018/1999 on the Governance of the Energy Union and Climate Action.

The new bill is also meant to guide Spain’s post-COVID-19 recovery efforts, as Spain

expects to receive EUR 140.4 billion from EU recovery funds. It proposes a target of at

least a 20% reduction in GHG emissions by 2030 (from 1990 levels) and to attain climate

neutrality in 2050, when almost 100% of energy will be sourced from renewable sources.

The Bill on Climate Change and Energy Transition provides more ambitious goals than the

EU 2030 targets on renewables and energy efficiency. While the EU aims for a 32% share

of renewables in overall energy use by 2030, the Spanish bill provides for a 35% target,

and a 70% sub-target for the use of renewables in electricity generation. Compared to the

EU energy efficiency target of at least 32.5%, Spain’s bill increases the target to 35%.

These Spanish targets are, in principle, aligned with the new EU target of a 55% GHG

emissions reduction by 2030.

Among its many measures, the bill provides for a portion of the general state budget to be

allocated to the energy transition, and envisages a ban on research permits and

exploration concessions for all hydrocarbons, including a complete ban on fracking

activities.

To support the expanding role of renewables in electricity, the bill establishes a new

remuneration framework for new renewable energy generation facilities based on a

contract for difference, awarded through competitive tendering procedures. It also calls for

new hydroelectric concessions to be granted priority for supporting the integration of

renewable energy into the electricity system and for optimising already-awarded access

and connection rights to the grid, making it possible to increase the power capacity of

existing generation facilities.

In the transport sector, the bill requires all new vehicles sold to be zero emissions by 2040,

and promotes electric vehicle charging points (see Chapter 4). It also introduces low-

emissions zones in cities with more than 50 0000 inhabitants, as outlined in the NECP.

Moreover, it establishes annual targets for biofuels and other alternative fuels for air

transport, and requires state-owned ports to be carbon neutral by 2050.

From a financial disclosure perspective, the bill requires financial institutions to publish

specific decarbonisation objectives for their loan and investment portfolios from 2023 in

line with the Paris Agreement. It also establishes non-financial reporting obligations of

listed companies (based on their level of exposure to climate risks and their strategies and

objectives for mitigation).

On the adaptation and conservation side, the bill integrates climate risks into coastal

planning and management, transport infrastructure, and land-use development under the

3. ENERGY AND CLIMATE CHANGE

National Adaptation Plan (see below). Moreover, it sets out a biodiversity strategy to

protect and restore Spain’s wildlife and ecosystems.

To help communities adjust to the energy transition, the bill requires approval by the

regions of a transition strategy for communities dependent on fossil fuel industries for their

livelihood every five years. As part of this strategy, specific transition agreements to

promote alternative economic activities will be developed in affected areas.

Lastly, to increase awareness and build public support for the energy transition, the bill

introduces climate change to school curriculums and promotes professional training in new

low-carbon skills and technologies. It also establishes a framework to ensure governance,

including the establishment of an independent committee of experts, regional energy and

climate plans, public participation, and internal administrative procedures for monitoring

and reporting.

The Bill on Climate Change and Energy Transition will be implemented in conjunction with

complementary strategies, such as the Just Transition Strategy (see Chapter 9), the

Spanish Strategy on Circular Economy, the Future Sustainable Mobility Law and the Long-

Term Building Rehabilitation Strategy.

Carbon pricing

Spain participates in the EU ETS, which is a cap-and-trade system covering around

1 000 stationary installations and 30 aircraft operators that represent around 40% of total

GHG emissions in Spain. The emissions reductions target under the system, set at the EU

level, is a 21% reduction from 2005 levels by 2020 and a 43% reduction by 2030, though

there are no targets at the national level. In Spain, between 2005 and 2019, emissions

covered by the EU ETS fell by 45%.

Allowances are provided for free to some installations based on carbon leakage (mainly

industrial companies and airline operators), though many free allocations will wind down

by 2030; the electricity sector already no longer receives free allowances. Auctioning is

the main allocation method for the electricity sector and will be increasingly used for

industrial companies transitioning away from free allocations. Spain uses 90% of its

auction revenues to support renewable energy, while the remaining 10% is used to support

other climate change priorities. Over the 2013-19 period, Spain raised EUR 4.6 billion in

auction revenues from over 1 000 auctions.

This ETS regime is complementary to the EU Effort Sharing Regulation, which covers all

emissions not affected by the EU ETS, as well as the EU LULUCF Regulation that covers

emissions and removals from land use, land-use change and forestry activities.

All of these EU emissions regulations, together with other regulations on renewable

energy, energy efficiency, waste, etc., are applied nationally in a consistent way to ensure

that Spain achieves its national, EU and international GHG commitments.

In addition, Spain developed a national carbon pricing policy in 2012, the so-called

“Climate Projects” (Proyectos Clima), as a system aimed at encouraging the reduction of

GHG emissions from facilities and sectors not covered by the EU ETS (transport,

residential, waste, agricultural, industrial, fluorinated gases), excluding removals by carbon

sinks. The programme supports projects that deliver CO

equivalent emissions reductions

that are then verified and purchased by a national carbon fund (Carbon Fund for a

3. ENERGY AND CLIMATE CHANGE

ENERGY SYSTEM TRANSFORMATION

Sustainable Economy, FES-CO

) at a fixed price during the first four years of a project.

Energy projects have included solar PV projects and solar irrigation projects in isolated

areas of the grid, electric and hybrid vehicles, modal shifts, as well as waste to energy

projects and slurry biodigestion projects with electric generation. This policy has proven to

drive innovation too, facilitating the transfer of clean technology and encouraging

mitigation efforts across sectors.

Spain does not currently apply any carbon pricing in non-ETS sectors, although it has

undertaken a number of assessments and studies to introduce environmental or carbon

taxation into various sectors, with an eye to citizen acceptance and co-ordination with the

autonomous communities that have competencies in certain areas of taxation.

However, there is a notable exception with Law 16/2013, which establishes some

environmental taxation measures, including a national tax on fluorinated gases, which has

been a very efficient measure for mitigating GHG emissions. According to the Spanish

National Inventory of Emissions, since the implementation of the tax in 2014, emissions of

fluorinated gases in Spain have fallen by approximately 65%.

Given the recent ratification of the Doha Amendment, the second commitment period of

the Kyoto Protocol entered into force in October 2020, which means that Spain’s goal

under the Kyoto Protocol is binding. Spain is one of the most active players in the Kyoto

Protocol mechanisms market, and currently holds around 17 million certified emissions

reductions (17 Mt CO

reduced) from the Clean Development Mechanism that could be

used to reach the Kyoto Protocol goal (which should be met easily, leaving a surplus of

certified emissions reductions). Spain has indicated that it will not use any Kyoto Protocol

units toward its goal under the second commitment period of the Kyoto Protocol.

Adaptation to climate change

The Spanish energy sector could be affected by a number of potential impacts of climate

change, including: increased frequency and severity of droughts and floods that could

affect hydroelectric generation; changes in sun and wind patterns that could affect local

solar and wind production; and an increase in extreme weather events that could disrupt

energy infrastructure. Changes in weather patterns, but especially the increased frequency

and intensity of extreme events, can cause damage to infrastructure that is critical to the

proper functioning of electricity, gas or oil systems. Recent storms reveal that damage can

affect overhead power lines, although liquefied natural gas (LNG) and conventional gas

terminals and refineries located in coastal areas will also face increased risks due to

storms, flooding and rising sea levels.

For Spain, climate scenarios point to an increase in the number of days per year with high

temperatures, which will lead to an increase in peak electricity demand associated with

cooling needs at certain times of the day and seasons. If no appropriate measures are

taken to target the most vulnerable segments of the population, there could also be an

increase in seasonal energy poverty ratios in certain regions associated with cooling

needs. Moreover, high temperatures can also hamper thermal power generators that need

water from rivers for cooling.

The Spanish government has already put in place measures to respond to climate change.

Since 2013, environmental impact assessments made for new energy infrastructure have

3. ENERGY AND CLIMATE CHANGE

been required to account for the impacts related to climate change. In 2014, the Spanish

Office for Climate Change completed the first report on adaptation to climate change in

the Spanish energy sector with action plans and timelines.

More recently, a new Spanish National Adaptation Plan 2021-2030, which was adopted

by the Council of Ministers in September 2020, includes a number of measures on

adaptation for the energy sector. Notably, the plan attempts to cover the entire energy

value chain, a leading example among countries with adaptation plans. Its components

include: primary energy supply; electricity generation; transport, storage and distribution;

and electricity demand.

Specifically, it calls for the integration of changes in primary energy supply resulting from

climate change into energy planning and management by: developing projections, for

various climate change scenarios, on the availability of water resources and their

generation potential by hydrographic basins; developing projections, for various climate

change scenarios, of the biomass potential by type of crops and regions; and using

projections on possible changes in available resources for energy planning and

management.

Given that changes in annual or seasonal rainfall patterns, average air and water

temperatures, and average wind speeds can affect the performance and optimal operation

of power plants, the National Adaptation Plan also calls for remedial actions, including:

making estimates on the potential impacts associated with climate change by type of

technology and region; identifying and analysing technological improvements that promote

the implementation of more resilient, efficient and adapted electricity generation facilities;

integrating the results in the planning of the energy transition into successive NECPs; and

identifying the needs of water resources for the generation of electricity.

Lastly, the National Adaptation Plan also includes a measure to prevent the impacts of

climate change on energy transport, storage and distribution. Action items will include:

carrying out analyses on the impact of climate change on the functionality and resilience

of electricity transmission and distribution networks and defining consequent adaptation

measures; identifying energy infrastructures that are highly vulnerable to extreme events

and promoting specific adaptation programmes; and integrating the results into energy

transition planning in successive NECPs.

Assessment

Spain has made substantial progress on policies mitigating climate change since the last

in-depth review by establishing an NECP, proposing a Bill of Climate Change and Energy

Transition, a Long-Term Decarbonisation Strategy 2050 and a Second National

Adaptation Plan. These key documents, in addition to supporting initiatives such as

road maps and strategies, provide greater clarity on Spain’s climate change ambitions.

Spain has committed to become a carbon-neutral economy by 2050. Spanish climate and

energy legislation as well as the NECP are comprehensive on targets and sectoral

contributions and entail policies and measures for decarbonisation, including renewable

energy and energy efficiency. The closure of coal mines and decommissioning of

remaining coal power plants will further help to achieve decarbonisation goals. However,

3. ENERGY AND CLIMATE CHANGE

ENERGY SYSTEM TRANSFORMATION

a carbon-neutral economy needs to be underpinned by equally ambitious policies on

security of supply, competitive markets, and research and innovation.

The domestic long-term framework for climate policy is set in the draft Bill for Climate

Change and Energy Transition. Currently in the Spanish parliament, the bill, in addition to

the 2050 climate neutrality goal, sets targets for 2030 (at least a 20% reduction of GHG

emissions from 1990 levels). The Long-Term Strategy 2050 will include an intermediate

target of GHG mitigation by 2040.

Under the NECP, Spain has set an ambitious target for GHG emissions reductions from

the effort-sharing sectors: 39% by 2030 compared to 2005 levels, which is 13 percentage

points more than the binding target of 26% set in the EU Effort Sharing Regulation. This

reduction would be reached with the additional measures specified in the NECP. Potential

barriers for these additional measures, in particular regulatory and administrative ones,

need to be removed. The national GHG reduction target of -20% in the draft Bill on Climate

Change and Energy Transition is a minimum, which does not exactly align with the NECP.

Moreover, the EU has agreed to increase the bloc’s GHG emissions reduction target for

2030 to 55%. Thanks to its existing ambitious targets and policies, Spain may already be

aligned with the new EU 2030 target.

The transport sector was the largest energy-related CO

emitter in 2019, accounting for

41% of total emissions from fuel combustion, followed by electricity and heat generation

(23%), industry (14%), other energy industries (9%), services (7%), and residential (6%).

Transport is the sector where GHG emissions continue to grow most. While Spain has a

robust transport infrastructure, it relies almost exclusively on road transport for freight.

As such, in transport (with around a 40% share of non-ETS emissions), Spain aims to

reduce emissions by 27 Mt CO

-eq by 2030 (a 33% reduction compared to 2020). This is

planned to be achieved by a more efficient organisation of the mobility system

(e.g. promoting a modal shift towards less emitting modes of transport, promoting the use

of the most efficient transport modes, promoting the renewal of the car fleet), and by an

increased uptake of renewable sources of energy, in particular electricity and advanced

biofuels. It is worth highlighting that concrete measures to this end have been identified,

e.g. low-emissions zones in every large city (extended to those with more than 50 000

inhabitants as of 2023), and that the quantitative impact of certain measures on energy

savings has been calculated. Regarding electro-mobility, the NECP aims at having

5 million electric passenger cars and light-duty vehicles on the roads in 2030. New vehicles

sold in these categories should have zero emissions by 2040. This will be supported by

grants for the purchase of electric vehicles and infrastructure development. Therefore, it is

clear that Spain’s strategy and measures for lowering transport emissions are

well-considered; the next stage will be to ensure timely implementation and sufficient

funding for the measures to keep progress on track.

To further achieve its climate target, the government is focusing on increasing the supply

of renewable energy and reducing energy demand through efficiency measures. Notably,

the NECP sets a target of a 74% renewable share in electricity by 2030, combined with

strong goals for electrification and a 39.5% improvement in energy efficiency.

The Hydrogen Roadmap considers renewable hydrogen as a key technology to increase

the production of renewable electricity and renewable gases, targeting 4 GW of hydrogen

electrolysis capacity in 2030.

3. ENERGY AND CLIMATE CHANGE

Air quality also needs to be ensured. Emissions of several air pollutants have decreased

over the last decades, while air quality remains a concern, particularly concentrations of

nitrogen dioxide (NO

). Personal transport and traffic congestion exacerbate problems with

air quality in major metropolitan areas (namely Madrid and Barcelona), leading to health

and economic costs. A comprehensive approach is needed, which is related to

environmental but also climate, energy and mobility issues. Investments in mobility, in

particular, should be in line with the National Air Pollution Control Programme.

Total investments to achieve the NECP’s objectives, including decarbonisation, are

estimated at EUR 241 412 million between 2021 and 2030, including EUR 196 000 million

of additional investments. The main sectors are: energy efficiency: 35%

(EUR 83 540 million); renewables: 38% (EUR 91 765 million); and networks and

electrification: 24% (EUR 58 579 million). Eighty per cent of investments are expected to

be private and 20% are planned public investments, placing a heavy reliance for meeting

emissions targets on sizeable private sector outlays. In this regard, it is imperative that

policies and measures outlined in the NECP are successful at mobilising private

investments.

Spain is also among the most exposed EU countries to climate change. It is therefore

crucial to anticipate the adverse effects (e.g. floods, coastal erosion, droughts, heat waves,

forest fires) through adaptation measures. The 2020 National Adaptation Plan 2021-2030

sets 18 thematic fields including forestry desertification, water and coastal areas in order

to facilitate integration of adaptation action in the different sectors of public and private

management.

Adapting the energy sector to climate change should be a core priority for the Spanish

government, given its close correlation with GHG emissions reduction and energy security

goals (e.g. variability of hydropower, cooling for fossil fuel plants, forests as biomass

sources and carbon sinks, increasing energy demand). Climate change has a strong

influence on the proper functioning of the energy system (like resilience of the electricity

grid and gas networks), and its detrimental effects would be amplified by growing cooling

demand and increased flooding risk.

Recommendations

The government of Spain should:

 Implement policies and measures in line with the NECP in a timely manner to

achieve national GHG emissions reduction targets and remove barriers to their

effectiveness.

 In co-ordination with industry, citizens and regional authorities, closely track the

implementation of measures contained in the NECP, evaluate progress, enforce

deadlines and adjust strategies, where needed.

 Monitor private sector investments between 2021 and 2030 toward decarbonisation

targets, and develop strategies to mobilise supplementary financing, as needed.

3. ENERGY AND CLIMATE CHANGE

ENERGY SYSTEM TRANSFORMATION

 Step up efforts to implement the National Adaptation Plan for the energy sector

given Spain’s outsized exposure to the impacts of climate change among EU

countries.

References

EC (European Commission) (2020), Integrated National Energy and Climate Plan

2021-2030, https://ec.europa.eu/energy/sites/ener/files/documents/es_final_necp_main_en.

pdf.

EEA (European Environment Agency) (n.d.), GHG Trends and Projections in Spain,

www.eea.europa.eu/publications/ghg-trends-and-projections-2012/spain.pdf (accessed on

3 November 2020).

EEA (2019), Annual European Union Greenhouse Gas Inventory 1990-2017 and Inventory

Report 2019, www.eea.europa.eu/publications/european-union-greenhouse-gas-inventory-

2019/at_download/file.

IEA (International Energy Agency) (2021), “CO₂ emissions by product and flow”, IEA CO

₂

Emissions from Fuel Combustion Statistics (database), www.iea.org/statistics.

UNFCCC (United Nations Framework Convention on Climate Change) (2020), Spain 2020

National Inventory Report, https://unfccc.int/documents/228014.

ENERGY SYSTEM TRANSFORMATION

4. Energy efficiency

Key data

(201

Total final consumption (TFC):

85.5 Mtoe (oil 51.3%, electricity 23.6%, natural gas 17.2%,

bio

energy and waste 7.0%, coal 0.6%, solar 0.4%, other renewables 0.4%) -5.9% since 2009

Consumption by sector:

industry 29%, transport 38%, residential 17%, services/other 16%

Energy consumption (TFC) per capita:

1.8 toe/capita (IEA average:* 2.8 toe/capita), -7%

since 200

Energy intensity (TFC/GDP

)**: 48 toe/USD million PPP (IEA average:* 62 toe/USD million

PPP),

-15% since 2009

Weighted average of IEA member countries in 2018.

GDP data are in billion USD 2015 prices and PPP (purchasing power parity).

Energy intensity

Spain’s gross domestic product (GDP) fell by 7% between 2008 and 2014 as a

consequence of the global financial crisis (Figure 4.1). Total final consumption (TFC) was

strongly affected by the shrinking economy and decreased by 20% in the same time frame.

While the economy rebounded by 15% in the next five years, TFC increased by 10%

between 2014 and 2018, to then decrease by 1% in 2019. As a consequence, the

TFC/GDP ratio decreased by 18% between 2008 and 2019, indicating that Spain has

decoupled economic growth from energy consumption. With a population that has been

relatively stable between 2008 and 2019 (+2%), TFC/capita also decreased in the same

decade by 15%.

The coronavirus pandemic hit the country hard in 2020, and OECD projections forecast a

contraction of the economy by at least 11% in 2020. This will likely have strong

consequences for TFC.

4. ENERGY EFFICIENCY

Figure 4.1 Energy consumption and drivers in Spain, 2000-19

Spain has experienced a decoupling of TFC and economic growth in recent years; TFC

in 2019 was at similar levels to 2000, while GDP was a third higher.

Notes: GDP = gross domestic product. TFC = total final consumption. GDP data are in billion USD 2015 prices and

PPP (purchasing power parity).

Source: IEA (2021), IEA World Energy Statistics and Balances (database), www.iea.org/statistics

In 2019, the energy intensity of the Spanish economy, measured as the ratio of TFC per

unit of GDP, was 48 tonnes of oil equivalent (toe) per USD million PPP, a decline of 26%

since 2000 (Figure 4.2). Spain has a relatively low energy intensity compared to other IEA

countries, both by GDP and per capita. In 2018, Spain was the seventh-lowest country

based on TFC/GDP and the fifth-lowest based on TFC/capita.

Figure 4.2 Energy intensity in select IEA member countries, 2000-19

Spain’s energy intensity per GDP has decreased in recent years, similar to other European

countries.

Notes: toe = tonne of oil equivalent. GDP data are in billion USD 2015 prices and PPP (purchasing power parity).

Data for Italy and IEA Europe are not available for 2019.

Source: IEA (2021), IEA World Energy Statistics and Balances (database), www.iea.org/statistics

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

Index 2000=1

GDP

Population

TFC

TFC/capita

TFC/GDP

0.045

0.050

0.055

0.060

0.065

0.070

0.075

toe/USD 1 000 GDP PPP

Germany

France

IEA Europe

Italy

Portugal

Spain

4. ENERGY EFFICIENCY

ENERGY SYSTEM TRANSFORMATION

Energy consumption by sector

Transport is the largest energy-consuming sector in Spain, accounting for 38% of TFC

in 2019, followed by industry at 29% (Figure 4.3). Both of these sectors were affected by

the global financial crisis in 2008, and rebounded several years later. However, the

industry sector experienced a longer and deeper drop that started in 2005 and hit new

lows in 2015, after which it started to increase again. The transport sector, in contrast,

decreased between 2007 and 2013 and had a stronger rebound between 2013 and 2019.

The residential and services sectors accounted for 17% and 16% of TFC, respectively,

in 2019, and were relatively stable between 2009 and 2019.

Figure 4.3 Energy consumption in Spain by sector, 2000-19

Energy consumption in the transport and industry sectors have followed the same trend as

the economy in recent years, while TFC in other sectors has been relatively stable.

* Industry includes non-energy consumption.

** Services/other includes a small share of energy used in fishing.

Note: Mtoe = million tonnes of oil equivalent.

Source: IEA (2021), IEA World Energy Statistics and Balances (database), www.iea.org/statistics

Energy consumption in transport

The transport sector in Spain consumed 32 Mtoe in 2019, equal to 38% of TFC. Transport

consumption dropped by 28% between 2007 and 2013, then rebounded by 17% between

2013 and 2019 (Figure 4.4). As a result, between 2009 and 2019, consumption from the

transport sector decreased by 5%. Oil represents the vast majority of transport energy

demand at 93%: diesel accounted for 68% of transport demand in 2019, gasoline 16% and

other oil products (mainly kerosene, fuel oil and liquefied petroleum gas [LPG]) 9%. In

recent years, the shares of natural gas, biofuels and electricity have increased, but are still

relatively minor. Road transport covered 88% of domestic transport energy use in 2019,

followed by domestic aviation at 7%.

Mtoe

Transport

Industry*

Residential

Services/other**

4. ENERGY EFFICIENCY

Figure 4.4 Energy consumption in transport in Spain by fuel, 2000-19

Almost all transport demand is met by oil, which covered 93% of fuels in 2018. The small

shares of biofuels, electricity and natural gas have been slowly increasing in recent years.

Notes: Mtoe = million tonnes of oil equivalent. The transport sector demand excludes international aviation and

navigation.

Source: IEA (2021), IEA World Energy Statistics and Balances (database), www.iea.org/statistics

Energy consumption in industry

The industry sector consumed 25 Mtoe in 2019 (Figure 4.5). Consumption decreased by

10% between 2009 and 2019, the result of a sizeable decline between 2004 and 2015,

followed by a rebound from 2016 to 2018. Most of the total drop consisted of oil, which fell

by 33% between 2009 and 2019. Coal, although it only represented a small share of TFC,

also decreased by 37%. Natural gas, oil and electricity each accounted for about a third of

total consumption by industry in 2019, with a slightly increasing share of bioenergy (+32%

between 2009 and 2019).

Figure 4.5 Energy consumption in industry in Spain by fuel type, 2000-19

Total final consumption in the industry sector decreased between 2005 and 2015, after which

it rebounded slightly in the following three years.

Notes: Mtoe = million tonnes of oil equivalent. Includes non-energy consumption.

Source: IEA (2021), IEA World Energy Statistics and Balances (database), www.iea.org/statistics

Mtoe

Electricity

Biofuels

Natural gas

Other oil products

Gasoline

Diesel

Mtoe

Natural gas

Bioenergy and waste

Electricity

Oil

Coal

4. ENERGY EFFICIENCY

ENERGY SYSTEM TRANSFORMATION

Industrial fuel consumption in Spain is spread out over several energy-intensive sectors.

In 2019, the chemical and petrochemical sector accounted for almost one-third of industrial

final consumption. Of this, about half is non-energy use (such as fuels that are used as

raw materials or transformed into another fuel). The non-metallic minerals industry is the

second-largest consuming sector, despite a 10% decrease between 2009 and 2019. All

other sectors account for 10% or less of industrial TFC each. While almost all sectors

reduced their consumption between 2009 and 2019, the construction sector expanded,

registering a 107% increase.

Energy consumption in residential buildings

The residential sector consumed 14.5 Mtoe in 2019, accounting for 17% of TFC. After

peaking in 2010, energy consumption by the residential sector fell and remained relatively

constant between 2013 and 2019 (Figure 4.6). In recent decades, the contribution of

electricity to residential energy consumption has increased, while fossil fuels have

decreased. Between 2009 and 2019, electricity supply to residential buildings increased

by 2%, while oil and natural gas decreased by 29% and 18%, respectively. Renewables

also increased in the same time frame, with bioenergy increasing by 4% and geothermal

and solar rising by 132% and 38%, respectively. They still represent minor shares of total

consumption in residential buildings, however.

As a result, in 2019, electricity was the main energy source for the sector, accounting for

43% of total energy consumption, followed by natural gas (21%), bioenergy (18%) and oil

(16%). Other renewables (mainly solar) accounted only for 2%, but have been increasing

in recent years.

Figure 4.6 Energy consumption in the residential sector in Spain by fuel, 2000-19

The contribution of electricity to energy consumption in the residential sector has been

increasing, while oil has declined.

Note: Mtoe = million tonnes of oil equivalent.

Source: IEA (2021), IEA World Energy Statistics and Balances (database), www.iea.org/statistics

In 2018, 42% of the energy consumed by residential buildings was used for space heating,

followed by residential appliances and water heating, which were responsible for around

26% and 17% of total residential energy consumption, respectively (Figure 4.7). Energy

consumption for residential space and water heating has been decreasing over the last

decade, while residential appliances increased their consumption by almost 60% between

Mtoe

Solar

Electricity

Bioenergy

Natural gas

Oil

Coal

4. ENERGY EFFICIENCY

2008 and 2018. In terms of both per capita and per dwelling, Spain’s energy intensity of

the residential sector is lower than the IEA average.

Figure 4.7 Breakdown of energy consumption in the residential sector in Spain by

use, 2018

Residential space heating and residential appliances consumed more than half of total

demand in the residential sector.

Sources: IEA (2020), Energy Efficiency Indicators 2020 (database), www.iea.org/statistics.

Energy consumption in services and other sectors

In 2019, energy consumption in the commercial and public services sector was 13.3 Mtoe

(16% of TFC). Electricity was the largest energy source, representing 53% of total energy

demand, while the rest was comprised mainly of fossil fuels: oil (26%), natural gas (19%)

and coal (1%), with a small share of bioenergy and waste (2%), and negligible

contributions (<1%) by other renewables (solar and geothermal) (Figure 4.8). Energy

consumption in commercial and public services grew by 5% from 2009 to 2019, mostly

met by increased supply of natural gas (+48%). Solar’s contribution doubled in the same

time frame, but still needs to grow to make a significant contribution to total energy

consumption in the sector.

42%

26%

17%

Residential space heating

Residential appliances

Residential water heating

Residential cooking

Residential lighting

Non-specified

Residential space cooling

4. ENERGY EFFICIENCY

ENERGY SYSTEM TRANSFORMATION

Figure 4.8 Energy consumption in the services sector in Spain by fuel, 2000-19

Energy consumption in the Spanish services sector has increased since 2000, with growing

electricity supply, which accounted for half of the sector’s supply in 2019.

* Geothermal increased from 5 ktoe in 2000 to 8 ktoe in 2019.

** Solar increased from 6 kilotonnes of oil equivalent (ktoe) in 2000 to 62 ktoe in 2019.

Notes: Mtoe = million tonnes of oil equivalent. This graph also includes the agriculture and fishing sectors.

Source: IEA (2021), IEA World Energy Statistics and Balances (database), www.iea.org/statistics

Institutional responsibilities

The Ministry for the Ecological Transition and the Demographic Challenge (MITERD) is

responsible for preparing federal energy legislation, developing national energy policy and

measures to ensure energy supply, co-ordination with other ministries, and monitoring of

policies related to the fulfilment of energy policy objectives. Therefore, it is responsible for

energy savings and efficiency policies, through the Secretary of State for Energy.

The General Sub-Directorate for Energy Efficiency and the Institute for Energy

Diversification and Saving (IDAE), which is a public business entity, report to the Secretary

of State for Energy.

The General Sub-Directorate for Energy Efficiency is in charge of developing the

guidelines of the Secretary of State for Energy in the area of energy efficiency, while the

IDAE manages energy efficiency programmes and projects to help Spain meet its energy

efficiency objectives. The programmes are often financed by the National Energy

Efficiency Fund (see below).

Energy efficiency policies and measures are frequently implemented at the regional and

municipal level, so MITERD usually develops these policies and measures in co-ordination

with the autonomous communities.

Energy efficiency targets and strategies

Since the last in-depth review, the National Action Plan for Energy Efficiency 2017-2020

was adopted as one of the main tools for energy efficiency policies and measures. Spain

set a target of a 24.7% improvement in energy efficiency by 2020 in the plan (relative to

2005 levels), which will require not exceeding 122.6 Mtoe of primary energy consumption

Mtoe

Geothermal*

Solar**

Electricity

Biofuels

Natural gas

Oil

Coal

4. ENERGY EFFICIENCY

in that year. In 2019, primary energy consumption in Spain was 120.7 Mtoe. Current

measures to promote energy efficiency include a range of actions in the form of legislative

changes and economic support.

Spain’s energy efficiency objectives are aligned with EU Energy Efficiency Directives,

which establish a common framework of measures to promote energy efficiency within the

European Union, with EU-wide targets of 20% improvement by 2020 and 32.5% by 2030

(relative to 2007 levels). Spain accepts these objectives and establishes, in the National

Energy and Climate Plan (NECP) 2021-2030, a national guideline for an energy efficiency

improvement of 39.5% by 2030, which will translate into primary energy consumption of

98.5 Mtoe. For reference, according to Eurostat data, Spain’s primary energy consumption

in 2018 was 124.63 Mtoe. The reduction in primary energy consumption proposed in the

NECP is equivalent to 1.9% every year since 2017, which when linked to an expected

annual increase in GDP during the same period of around 1.7%, will require an

improvement in the primary energy intensity of the economy of 3.5% per year until 2030.

This would be well above the IEA average over the last decade (and 0.5% above the 3%

annual improvement rate required to achieve the commitments of the United Nations

Sustainable Development Goals or the Paris Agreement).

EU member states must also achieve a final cumulative energy savings target in the

periods 2014-20 and 2021-30, in accordance with Article 7 of the EU Energy Efficiency

Directive. For the first period, Spain’s target is 15 979 ktoe (or 571 ktoe per year) of new

and additional savings in final energy. The target for the second period is 36 809 ktoe (or

669 ktoe per year). These savings must be achieved through the implementation of a

system of energy efficiency obligations on certain companies (electricity and gas trading

companies and wholesale operators of petroleum products and LPG), or by applying

alternative regulatory, fiscal, economic, or information and communication measures to be

carried out by the government. Spain has opted for a combination of both systems. Spain’s

most recent Annual Monitoring Report sent to the European Commission indicated

accumulated final energy savings from 2014 to 2018 of 14 047 ktoe, which represents

87.9% of the target.

Figure 4.9. Spain’s cumulative final energy savings projected for 2021-30

Source: Ministry for the Ecological Transition and the Demographic Challenge.

The NECP proposes 17 measures to meet the 2030 target, 10 of which were designed

along a sectoral approach, applying proportional savings to each sector based on its

consumption. The transport sector stands out, with four measures, amounting to an

28%

38%

18%

13%

Industry

Transport

Residential

Services

Agriculture and fishing

4. ENERGY EFFICIENCY

ENERGY SYSTEM TRANSFORMATION

expected 14 Mtoe of savings in 2021-30. This is followed by the industrial and residential

sectors, with 10.3 Mtoe and 6.7 Mtoe of savings, respectively. Lastly, the tertiary and

agriculture and fishing sectors represent the lowest contribution with 4.7 Mtoe and

1.2 Mtoe, respectively.

The main financial instrument for energy efficiency actions in Spain is the National Energy

Efficiency Fund (FNEE), which was created by Law 18/2014 approving measures for

growth, competitiveness and efficiency. It is mainly financed by contributions of gas and

electricity trading companies, operators of wholesale petroleum products, and wholesale

LPG operators. It amounts to around EUR 200 million in annual funding over the 2014-20

period. Royal Decree-Law 23/2020 extended the validity of the FNEE to 31 December

2030. The fund’s budget is dedicated to financing mechanisms for economic, financial,

technical assistance, training, information or other measures to increase energy efficiency

in various sectors in ways that help to achieve the national energy-saving objective.

Around EUR 2 billion are expected from the fund over the 2021-30 period.

Additionally, the government is studying the complementary implementation of a system

of energy-saving certificates, which will add to energy savings and associated investments.

In addition to the FNEE, EUR 50 million from the general state budget has been allocated

to sustainable and efficient mobility in recent years. The Spanish administration is also

studying various financing mechanisms, with the aim of mobilising private capital,

especially in building renovation, given its importance to meeting 2030 targets.

Spain also benefits from co-financing from the European Regional Development Fund

(ERDF) in the period 2014-20, both in the Multiregional Operational Programme of Spain

(POPE) and in regional programmes. The amounts allocated to these actions in the

2014-20 period are: EUR 1.98 billion for POPE Low Carbon Economy actions, of which

around 70% corresponds to energy efficiency actions; EUR 1.3 billion for POPE

Sustainable and Integrated Urban Development actions, of which 25% corresponds to

energy efficiency actions; and EUR 1 billion in regional programmes, of which around 70%

corresponds to energy efficiency actions.

Spain will also further benefit from the post-COVID-19 European recovery funds, whose

disbursement channels will be Structural and Investment Funds and the European Social

Fund. To this end, Spain’s Recovery, Transformation and Resilience Plan includes a

number of measures, such as financial support, to promote energy efficiency in buildings,

the integration of renewables and the promotion of sustainable mobility. Specifically, the

draft Recovery, Transformation and Resilience Plan promotes the acquisition of electric

vehicles, deployment of recharging infrastructure, rehabilitation of buildings and urban

redevelopment, integration of renewable energy in industry, etc. The national plans are

expected to be approved by the European Commission in April 2021.

Energy efficiency policies in the transport sector

According to the Spanish government, the transport sector is the largest energy consumer

in Spain, reaching nearly 43% of Spain’s final energy consumption in 2019, with private

vehicles responsible for 15% of total final energy consumption.

As such, transport is a priority area within the NECP and in the draft Law on Climate

Change and Energy Transition. In particular, the government plans to cut consumption

4. ENERGY EFFICIENCY

and lower emissions in the transport sector by promoting a sizeable modal shift in mobility,

accounting for 35% of the passenger-kilometres that are today carried out by internal

combustion engine vehicles.

In this regard, like the NECP, the draft Law on Climate Change and Energy Transition

includes the designation of low-emissions areas with limited access to the most polluting

vehicles in all cities with over 50 000 inhabitants from 2023 onwards. These jurisdictions

will develop sustainable urban mobility plans toward this end. In order to enforce such

requirements, regional and local administrations will play a critical implementing role.

Another component for boosting efficiency and decarbonising the transport sector is fuel

switching toward renewables, which is targeted to reach 28% in transport by 2030, mainly

through electrification and the use of advanced biofuels. To this end, the draft Law on

Climate Change and Energy Transition will require the installation of charging points in

petrol stations with sales over 5 million litres.

In the longer term, Spain will adopt measures to improve vehicle efficiency in accordance

with European regulations. Based on standards, new passenger cars and light commercial

vehicles are expected to gradually reduce their emissions to reach 0 g CO

/km no later

than 2040.

The NECP outlines several measures in the transport sector over the 2021-30 period to

lower energy consumption and reduce emissions. These include:

1. Low-emissions zones and modal shift measures: Focusing on urban transport,

the government plans to work with local governments to discourage the use of

private vehicles in favour of shared use systems and other modes of transport such

as walking and cycling. Measures will include the establishment of low-emissions

zones, restrictions on private transport (such as restricted access in concentrated

urban zones for polluting vehicles), and increased spending on public transport

and related infrastructure. The estimated energy savings for this measure is

5 622.9 ktoe of cumulative final energy savings in the 2021-30 period and its total

cost is projected to be EUR 3.14 billion in public investment.

2. More efficient use of the means of transport: Reducing final energy

consumption from public and private vehicle fleets in road and rail transport will be

achieved through actions such as fleet audits and centralised technology systems

to manage fleet energy consumption. The target for this measure is 2 221.4 ktoe

of cumulative final energy savings and its estimated cost is EUR 73 million (out of

which EUR 22 million is public).

3. Renewal of the vehicle fleet: The government plans to promote upgrades to more

energy efficient vehicles, especially for urban delivery fleets and taxi services

through car scrappage schemes, tax incentives, financing instruments and

restrictions for older vehicles. This measure is expected to result in 2 519.6 ktoe

of cumulative final energy savings and EUR 77 million of investment (public and

private).

4. Promotion of electric vehicles: With a very low current penetration rate for

electric vehicles (EVs), the government plans to deploy public charging

infrastructure and targets to reach a fleet of 5 million EVs by 2030. The Ministry of

Finance will also assess prospects for further altering the vehicle registration tax.

4. ENERGY EFFICIENCY

ENERGY SYSTEM TRANSFORMATION

Accumulated final energy savings over the 2021-30 period are estimated at

3 524.2 ktoe/year, while the total investment associated with increased use of EVs

is EUR 132.4 billion. The government projects public financial support of

EUR 200 million per year over 2021-25, and estimates that after 2025, price parity

for EVs will not require any more public support.

The NECP also includes measures to promote the transfer of goods and passengers from

road to rail, electrification of railway networks and increasing electricity supply to ships in

ports. Moreover, it aims to increase the role of biofuels in aviation and achieve greater

energy efficiency in the sector.

The government also places due consideration on helping its automotive industry

implement measures that facilitate the development and penetration of EVs. As such, in

June 2020, it presented its aid package for the COVID-19 pandemic for the domestic auto

industry, which represents 10% of the country’s GDP and 19% of its exports, supporting

up to 2 million direct and indirect jobs (second only to Germany in Europe) (Morgan, 2020).

The stimulus package – called the Plan to Boost the Value Chain of the Automotive

Industry, towards a Sustainable and Connected Mobility – includes 20 measures that cover

the entire value chain of the industry.

The plan has a budget of EUR 3.75 billion and includes green measures to incentivise

increased production and the purchase of cleaner vehicles. The transport efficiency

component will consist of funds from the general state budget as well as the FNEE, which

may be co-financed with money from the ERDF. Measures include:



Plan RENOVE (EUR 250 million), aimed at upgrading the private vehicle fleet, which in

Spain has an average age of 12 years.



Plan MOVES II (EUR 100 million), to promote the acquisition of alternative fuel vehicles,

EV charging infrastructure, electric bicycle systems and sustainable mobility programmes

by companies and municipalities to adapt cities to the crisis caused by the COVID-19

pandemic.



Plan MOVES Singulares II (EUR 30 million), to promote innovation in electro-mobility and

green hydrogen for transport, storage and the use of information technology for the

management of fleets, especially for road freight transport and last-mile solutions.



DUS Program (ERDF), aimed at municipalities to promote modal change in cities through

the implementation of urban mobility plans.

To further support the uptake of EVs, Spain is actively promoting the deployment of electric

charging infrastructure from relatively low levels at present. The National Action

Framework for Alternatve Energy in Transport was approved in December 2016 in

response to EU Directive 94/2014 regarding the deployment of trans-European alternative

fuel infrastructure. Currently, public EV recharging in Spain is a liberalised sector, with

companies (and consumers) responsible for gradually deploying recharging services

based on demand in the sector. More recently, the government announced it will add a

new basic requirement HE6 to the Technical Building Code, which establishes the

conditions for developing the minimum infrastructure necessary for smart charging of

electric vehicles in parking lots. A public consultation on the plan is still underway, but the

working draft of the plan includes requirements for new residential buildings from 2023:

the pre-installation of charging infrastructure in 100% of new residential parking lots and

20% of the parking spaces in new commercial parking lots; one charging point per

4. ENERGY EFFICIENCY

40 parking spaces in new residential buildings, with one point as a minimum; and one

charging point per 20 parking spaces in new public buildings.

In addition to the above-mentioned policies and measures, Spain also has additional

strategies and efforts underway in the transport sector. These include a Sustainable and

Connected Mobility Strategy that is currently under discussion; a draft Law on Sustainable

Mobility and Financing of Public Transport, which is in process; a comprehensive review

of environmental taxation by the Ministry of Finance that could lead to a new framework

for taxation that better facilitates a low-carbon transition in the transport sector; and a

public consultation on transport’s role in the Long-Term Strategy.

Spain is also taking steps to bolster consumer awareness and public support for the energy

transition in the transport sector. This includes European projects that collect data related

to charging/refuelling points for alternative fuels and fuel price comparisons that will allow

citizens to access information and take informed decisions on fuel consumption. The IDAE

has also developed a web platform that includes a guide on commuting options, best

practices, a directory of automobile companies and an automobile cost calculator. Royal

Decree 28/2020 will further support options to encourage teleworking and reduce fuel

consumption from commuting.

Energy efficiency policies in the industry sector

Spain’s efforts in the industrial sector have focused on promoting programmes to improve

technology and industrial process management systems. These programmes seek to not

only substitute equipment and industrial installations that have poor energy performance

with those that use more efficient technologies, but also to promote the realisation of a

greater number of energy management systems in industry. These programmes operate

in both small and medium-sized enterprises and large companies in the industrial sector,

especially in facilities not included in the EU Emissions Trading System (ETS).

The main programmes executed to date are:

1. Program for the Promotion of Industrial Competitiveness, whose objective is to

stimulate business investment that will contribute significantly to the generation of

added value in industry. The programme has supported investment plans to

improve operations at industrial facilities through changes and modifications that

would have a major impact on their competitiveness. Active since 2013, the

programme is organised annually.

2. Aid programmes for energy efficiency actions in small and medium-sized

enterprises and large companies in the industrial sector supported by the FNEE,

with the aim to incentivise actions in the industrial sector that reduce CO

emissions by improving energy efficiency and reducing final energy consumption.

The first call for projects, managed by the IDAE, was held from 5 May 2015 to 5 May 2016,

while the second call, also managed by the IDAE, was held from 1 January 2017 to

31 December 2018. The third call has been managed by the autonomous cities and

communities, and ran through 31 December 2020. The first call resulted in

EUR 215 million in investments (with public support of EUR 69 million), while the second

call resulted in EUR 681 million in investments (with public support of EUR 158 million).

4. ENERGY EFFICIENCY

ENERGY SYSTEM TRANSFORMATION

Based on the positive results seen so far, the government plans to continue such

programmes, along with voluntary agreements with the representative associations of

more energy-intensive subsectors.

The NECP outlines one measure for the industry sector, “Improvements in the technology

and management systems of industrial process.” This measure aims to facilitate the use

of final energy-saving technologies, replace equipment and implement energy

management systems, especially in facilities not included in the EU ETS. This measure

has been designed in a similar way to the programmes to promote energy efficiency in the

industrial sector launched in Spain by the FNEE, from May 2015 to 2019, mentioned

above. The measure aims to achieve 10 256 ktoe of cumulative final energy savings during

the 2021-30 period, and will be funded by public support programmes and voluntary

agreements. Total investment is estimated to be EUR 7.37 billion, with public support of

EUR 1.647 billion.

Since February 2016, large companies have been obliged to carry out an energy audit

every four years. This requirement covers around 85% of the total final energy

consumption of all facilities located in Spain. Responsibility for the inspection of energy

audits falls on the autonomous communities. A public Administrative Registry of Energy

Audits was created by MITERD, which reflects the information from 34 423 audits to date,

as well as voluntary submissions from other companies that have carried out audits.

However, there is no comprehensive database of large companies in each region that fall

under this obligation, so compliance is unknown, nor are there consistent penalties for

non-compliance.

As an alternative, companies may apply an energy or environmental management system

certified by an independent body in accordance with the corresponding European or

international standards, such as the ISO 50001 energy management system, provided that

the system includes an energy audit. However, the information collected in the official

report that is sent to the Administrative Registry of Energy Audits does not specify whether

a company has ISO 50001 certification. Moreover, there is no official registry of companies

that have this certification, though the Association of Energy Efficiency Companies

maintains a list.

Under the NECP, energy audits and management systems will also be promoted across

the private sector. Public aid and support will help finance such audits, using the obligatory

energy audits as the main assessment tool to define the eligible investment required to

achieve savings. They will also promote energy audits in small and medium-sized

enterprises that are not obligated to conduct audits.

The NECP also calls for increasing energy efficiency considerations for public

procurement. Spanish legislation has a regulatory framework that promotes the use of

energy savings and efficiency criteria in the procurement processes for goods, services

and buildings by public administrations, including regional and local governments.

Relatedly, the NECP also calls for increased professional and academic training in the

area of energy efficiency.

Energy efficiency policies in the buildings sector

The Technical Building Code, approved by Royal Decree 314/2006, is the regulatory

framework that establishes the basic quality requirements that buildings and facilities must

meet. It was modified in December 2019 to comply with the latest EU Energy Performance

4. ENERGY EFFICIENCY

of Buildings Directive (EPB). In particular, the Basic Document of Energy Saving, which is

mandatory for new and refurbished buildings, was amended to more clearly define nearly-

zero energy consumption buildings. The new definition sets a more ambitious limit of a

40-60% reduction in energy consumption, improvements in thermal envelope

requirements, tighter conditions for controlling energy demand, conditions for thermal

installations, conditions for lighting installations, a minimum contribution of renewable

energy to cover the demand for hot water and a minimum generation of electricity from

renewable sources.

A new royal decree is expected to update the certification procedure for buildings. The

broadened scope will include new buildings, sold or rented buildings, public administration

buildings, deeply renovated buildings, and buildings greater than 500 square metres (m

)

for certain uses such as commercial activities. The amendments will transpose

requirements from the EU EPB with respect to improvements to the quality of certification

of buildings, including on-site technical evaluations, reduction of certification validity for

poorly performing buildings, and more specific information during the certification about

opportunities for improvements to building elements with the greatest efficiency impacts,

notably the envelope, thermal installations, and automation and control systems.

At the same time, the government is preparing a new Royal Decree for the Regulation of

Thermal Installations in Buildings, also in line with EU EPB requirements. The

amendments are expected to be approved in 2021. The scope will remain focused on

space heating, space cooling and water heating in new and renovated residential and

commercial installations. The amendments will adapt to the new EU ecodesign

requirements for equipment; tighten energy efficiency requirements, including imposing

improvements to avoid oversized equipment and adjust working temperatures for heat

pumps; district heating and cooling consideration in buildings and thermal installations

(see below); and digitalisation of buildings.

The government also provides financial support for energy efficiency renovations through

the Energy Rehabilitation of Existing Buildings (PAREER-CRECE) programme. Qualified

projects must either include: energy efficiency improvements of the thermal envelope,

space heating, space cooling and water heating installations, and lighting; or substitution

of conventional energy for solar thermal, biomass or geothermal energy; or improvements

to lighting installations. The programme is financed through direct grants of up to 30% and

repayable loans of up to 70%. The first call under this programme was held for projects

undertaken between October 2013 and May 2016 with a budget of EUR 200 million (of

which EUR 181 million was executed), while the second call (PAREER II) took place from

January to December 2018 with a budget of just over EUR 200 million. The average

investment is EUR 291 000 per action, with an average aid of EUR 190 000 per action. To

date, the majority of programme funds have supported upgrades to the thermal envelopes

of buildings.

Moreover, Article 5 of the EU Energy Efficiency Directive requires that 3% of the surface

area of public buildings be renovated annually in order to comply with the minimum energy

performance requirements established under Article 4 of the EU EPB. Between 2014

and 2019, 1 626 214 m² were renovated, which represents 94% of the objective for 2020.

The remaining area to be renovated (110 763 m²) can be compensated by exceeding the

renovation objective in subsequent years. The renovation target for 2020 is 279 944 m².

The NECP sets a renovation target for federal government buildings of 300 000 m

per

year starting in 2021, which exceeds the 3% objective of the EU Directive.

4. ENERGY EFFICIENCY

ENERGY SYSTEM TRANSFORMATION

For appliances, equipment and lighting, Spain follows the EU Energy Labelling and

Ecodesign frameworks.

The NECP outlines the following efficiency measures in the buildings sector, several of

which are already in place:

1. Energy efficiency in existing buildings in the residential sector: In line with an

updated Long-Term Building Renovation Strategy, the government will promote

energy upgrades of the existing building stock, prioritising the thermal envelope of

buildings as well as thermal installations for heating, cooling and hot water. The

activities will be pursued through grants and other financing instruments, building

off the PAREER programme. The government expects the measures to achieve

4 756 ktoe of cumulative final energy savings over 2021-30, as well as upgraded

thermal envelopes in 1.2 million dwellings at a total cost of EUR 5.5 billion, mainly

funded by European Structural and Investment Funds.

2. Renewal of residential equipment: Focused on household appliances, with a

priority to higher energy-consuming appliances such as fridges and washing

machines, the government plans to increase consumer awareness and enter into

voluntary agreements with manufacturers to improve communication to

consumers. The market for household appliances is currently 76 million

appliances. The government’s target of around 2.4 million new high-efficiency

appliances sold each year would create total cumulative final energy savings of

1 976 ktoe in the period 2021-30.

3. Energy efficiency in services sector buildings: The government will extend an

obligation to renovate public buildings and offer financing options for the upgrade

of other services buildings, including extending public support programmes such

as PAREER and training for agents involved in energy upgrades. Support will

include improvements to the thermal envelope, thermal installations and lighting

systems. The measure is targeted to achieve 1 379 ktoe of cumulative final energy

savings over 2021-30 from the energy renovation of 5 million m

per year of the

public and private building stock. The total estimated public support for the

measure is EUR 2.2 billion, a large portion of which is expected to come from

European Structural and Investment Funds.

4. Energy efficiency for cooling equipment and large air-conditioning systems

in the services sector and public infrastructure: The government plans to offer

aid through grants and financing to upgrade large air-conditioning systems, cooling

equipment, and refrigeration and freezing components, as well to improve the

energy efficiency of publicly owned infrastructure, mainly street lighting and water

treatment, purification and desalination facilities. The measure aims to achieve

3 350.4 ktoe of cumulative final energy savings during the 2021-30 period, and

mobilise EUR 6.3 billion in investment, of which the public budget will cover

EUR 3.9 billion.

The NECP also outlines cross-cutting measures that include the promotion of energy

services. The role of energy service providers was incorporated into Spanish law by Royal

Decree-Law 6/2010 from April 2010. Since then, Spain has approved plans and

programmes with the main objective of increasing the utilisation of energy providers by the

public sector. The recent publication of the Eurostat guide on accounting for energy

performance contracts has helped remove one of the main barriers to investments in the

4. ENERGY EFFICIENCY

energy upgrade of public buildings. Under the NECP, energy agencies (the IDAE at the

national level or others at the regional or local levels) will provide new contract templates

adapted to Eurostat’s recommendations and compliant with the new Public Sector

Contracts Law, aimed to further support public sector energy performance contracts. For

the private sector, the NECP plans for the removal of regulatory and administrative barriers

to self-consumption, eventually leading to new business models based on renewables

generation and demand reduction.

Spain’s Long-Term Strategy also includes a plan for the energy rehabilitation of the

building sector over 2020-50. The strategy includes an assessment of existing buildings,

energy consumption in buildings, refurbishment of buildings, as well as past strategies and

policies. It will map out objectives and scenarios as well as implementation measures and

monitoring indicators.

In addition, the National Strategy against Energy Poverty 2019-2024, approved by the

Council of Ministers, includes financial assistance for the energy rehabilitation of buildings.

District heating and cooling

In 2019, there were 414 district heating or cooling networks with a total installed power of

1 576 megawatts (MW). Of these, 1 189 MW were heating networks and 386 MW were

cooling networks. Eighty per cent of the networks use renewable energy in their energy

mix. The final energy consumption of district heating and cooling in 2017 was 41.5 ktoe,

or 0.15% of the final energy consumption of the entire heating and cooling sector.

A full evaluation of the potential for the use of high-efficiency co-generation and efficient

urban heating and cooling systems was carried out in 2015, in accordance with European

directives. The aim was to analyse the technical and economic feasibility of high-efficiency

co-generation systems and urban heating and cooling networks in Spain.

Three general groups own district heating and cooling networks in Spain:

1. Municipal district heating and cooling systems in Spain are owned by public-private

associations. The ownership structure of these corporations, which are created

exclusively to develop and manage large infrastructure, generally consists of one

or more public organisations (municipal, regional or national) and a private

operator that manages the network. This group represents more than a third of the

country’s total installed capacity and is expected to continue growing in the coming

years. The networks are usually linked to urban renewal plans or new

developments and tend to be technologically advanced, efficient and

environmentally friendly.

2. Public district heating and cooling systems are generally owned by local public

bodies (municipal councils or local energy coalitions) and service municipal

facilities such as administration offices, sports facilities or social housing. This

group represents approximately 32% of the total installed capacity and has grown

steadily thanks to European financing programmes such as the European Social

Fund and the ERDF.

3. Private district heating and cooling systems include systems owned by private

companies to satisfy the energy demand required for their activities (hotels, farms,

4. ENERGY EFFICIENCY

ENERGY SYSTEM TRANSFORMATION

business offices, educational institutions, hospitals, etc.) and residents’

associations. This group represents approximately 35% of total installed capacity.

Regarding technology and fuels, in 2019 around three out of four of the networks used

biomass exclusively or in combination with other fuels, typically due to their proximity to

small- and medium-sized municipalities, farms and factories. On the other hand, 22% of

networks use conventional fuels such as natural gas, LPG and diesel only. According to

Spanish government data, the exclusive use of renewables in district heating and cooling

networks has increased in recent years, from 16% in 2015 to 22% in 2019.

Although there is no specific regulation on the procedures for the authorisation, certification

and licensing of heating and cooling networks, there are certain legal provisions that affect

the development of heating and cooling networks in Spain. According to Royal

Decree 56/2016, transposing EU Directive 2012/27 on energy efficiency, necessary

measures must be taken to develop an urban heating and/or cooling infrastructure in those

areas where high efficiency co-generation potential is identified. Moreover, under Royal

Decree 1027/2007, which approves the Regulation of Thermal Installations in Buildings

(RITE), heating systems for new buildings of more than 1 000 m

require a technical

analysis that justifies systems choices based on energy efficiency. This analysis must

include a comparison with alternative heating systems depending on the characteristics of

the building and its environment, including the possibility of connecting the new building to

a district heating network.

Specific programmes promoting district heating and cooling in Spain have included:



The GIT Program: Provided financial support for large thermal energy production facilities

in buildings using renewables. It was in operation between 2011 and 2020.



CLIMA Projects: Provided funding to projects that reduce GHG emissions, operational from

2012 until 2019.



Aid Programme for the Energy Rehabilitation of Existing Buildings (PAREER-CRECE

programme): Provided aid and financing for the energy rehabilitation of buildings (see

above).



DUS: An aid programme for direct subsidies to specific projects of local entities that

promoted a low-carbon economy in the framework of the operational programme of ERDF

for sustainable growth in 2014-20.

The NECP includes a measure on a “Framework for renewable thermal energy

development”, which is focused on promoting renewable energy for thermal uses in the

buildings sector, especially through the use of district heating and cooling. Actions included

in this measure to promote district heating and cooling networks are:



gather statistical annual information



inform consumers about the renewable energy share of the district heating or cooling

network they are connected to



evaluate the potential of district heating or cooling in new urban developments through

cost-benefit analysis



development of renewable energy communities linked to district heating or cooling.

In particular, in the NECP, district cooling networks are considered one of the tools that

will increase the share of renewable energy in the consumption of heating and cooling by

1.3% per year from 2020 levels.

4. ENERGY EFFICIENCY

Assessment

Spain’s energy efficiency targets are driven by the EU Energy Efficiency Directive, which

establishes a common framework of measures to promote energy efficiency within the

European Union with the objective of improving energy efficiency by 20% and 32.5%

by 2020 and 2030, respectively (relative to 2005 levels). It also establishes objectives on

the renovation rate of public buildings and cumulative end-use energy savings.

Since 2015, the National Energy Efficiency Action Plan 2017-2020 has been one of the

main policy documents for energy efficiency policies and measures in Spain. Spain set a

target of a 24.7% improvement in energy efficiency by 2020 in the plan, which required not

exceeding 122.6 Mtoe in primary energy consumption. Spain reviewed and updated the

target in the NECP to 24.2% by 2020, which required not exceeding 123.4 Mtoe in 2020.

According to Eurostat, in 2019, primary energy consumption was 120.7 Mtoe.

Looking ahead to the next decade, the preparation of the NECP was guided by the “energy

efficiency first” principle. The NECP established an ambitious national indicative energy

efficiency target of 39.5% by 2030, which is equivalent to improving primary energy

intensity by 3.5% each year up to 2030, and will lead to a maximum primary energy

consumption of 98.5 Mtoe in 2030.

The National Energy Efficiency Fund was created in 2014 and is the main instrument to

implement measures for financial and economic support, technical assistance, training and

information, and other measures to increase energy efficiency across all sectors. The fund

is mainly financed by contributions of gas and electricity trading companies, operators of

wholesale petroleum products, and wholesale LPG operators, amounting to around

EUR 200 million a year. It will function over 2021-30, with an estimated budget of

EUR 2 billion.

Under Article 7 of the Energy Efficiency Directive, Spain must achieve a cumulative final

energy savings of 15 979 ktoe between 1 January 2014 and 31 December 2020, and 36

809 ktoe between 1 January 2021 and 31 December 2030. These savings will be achieved

through the implementation of a system of energy efficiency obligations on certain

companies (electricity and gas trading companies and wholesale operators of petroleum

products and LPG), or by applying alternative regulatory, fiscal, economic, or information

and communication measures to be carried out by the government. Spain has opted for a

combination of both systems and has been using the National Energy Efficiency Fund to

implement measures, supplemented by funds from the general state budget as needed.

In 2018, the accumulated final energy savings were 14 047 ktoe, which represents 87.91%

of the 2020 target.

To ensure clarity of financing, the government could more clearly define budgetary

estimates necessary to achieve the objectives of each of its measures, especially as it

relates to public financing. In this regard, early guidance on spending priorities for energy

efficiency measures from post-COVID-19 EU recovery funds will be an important first step.

To this end, Spain has demonstrated a high degree of ambition in its Recovery,

Transformation and Resilience Plan with respect to promoting energy efficiency through

fiscal measures across sectors, in buildings, industry and transport.

For 2021-30, 10 of the 17 energy efficiency measures presented in the NECP have been

designed taking a sectoral approach, with the aim of contributing new energy savings

4. ENERGY EFFICIENCY

ENERGY SYSTEM TRANSFORMATION

equivalent to 669 ktoe/year to the final energy savings target. The transport sector stands

out with four measures, and will contribute with 14 Mtoe of savings, followed by the

industrial and the residential sectors, with 10.3 Mtoe and 6.7 Mtoe, respectively. The

tertiary and agriculture and fishing sectors represent the lowest contribution, with 4.7 Mtoe

and 1.2 Mtoe, respectively.

The transport sector is the largest energy consumer in Spain, reaching nearly 43% of

Spain’s final energy consumption in 2019, with private vehicles responsible for 15% of total

final energy consumption.

Spain set an ambitious objective for the transport sector in its NECP, including to promote

modal shifts in urban areas to achieve a reduction in passenger traffic by 35% by 2030,

and in interurban traffic by 1.5% per year. Other measures include: increasing the

efficiency of the modes of transport used; renewal of the vehicle fleet toward the most

efficient; electrification of the vehicle fleet starting with the deployment of public recharging

infrastructure and a target of 5 million electric vehicles by 2030; and the shifting of goods

and passenger transport from road to rail, along with the electrification of the railway

network and electricity supply of ships in ports.

Furthermore, the draft Law on Climate Change and the Energy Transition foresees that

from 2023 onwards, low-emissions areas will be identified in all cities with more than

50 000 inhabitants. Charging points for electric vehicles will be compulsory in petrol

stations with sales of over 5 million litres.

To help the automotive sector manage a transition to produce more electric vehicles and

to give an economic incentive during the COVID-19 pandemic, in June 2020 the

government presented the “Plan to Boost the Automotive Industry Value Chain towards a

Sustainable and Connected Mobility”. This plan includes the MOVES II Program and the

MOVES Singulares II Program. Both are incentive programmes for sustainable mobility

and innovation, including electric vehicles and electric charging infrastructure. There is

also a RENOVE Plan aimed at renovating the vehicle fleet, which in Spain has an average

age of 12 years.

In addition, to improve energy efficiency in transport, the government also has plans to

promote modal shifts in cities away from passenger cars to rail, public transit, walking,

bicycles and shared rides. To support uptake, the government has launched public

information campaigns. However, the government should also give due consideration to

further supporting changes in consumer behaviour through fiscal measures, including the

introduction of taxation on carbon-intensive fuels.

The industry sector is the second-highest energy consumer in Spain. Public support in this

sector has focused on promoting programmes to improve technology and industrial

processes and the implementation of energy management systems, through the Program

for the Promotion of Industrial Competitiveness and the National Energy Efficiency Fund.

Given the good results obtained so far, continuation of these types of programmes,

together with the execution of voluntary agreements with representative associations of

energy-intensive subsectors, are the main mechanisms of action that the NECP foresees

to continue to improve energy efficiency in the industry sector.

Following Article 8 of the EED, Spain imposes an obligation on large companies to conduct

energy audits every four years, or as an equivalent to this obligation, to implement a

system of energy or environmental management. The company audit must cover at least

4. ENERGY EFFICIENCY

85% of the total final energy consumption of all its facilities located in the national territory.

There is no obligation on industry to implement the results of audits. Spain has an online

Administrative Registry of Energy Audits with information on the audits carried out, which

currently includes 34 423 audits. The autonomous communities are responsible for

checking the quality of the energy audits. An updated central registry of companies that

are required to perform an audit, which would provide a clearer view of the universe of

companies under the obligation, appears to be lacking.

The NECP foresees that the financial support programmes with a sectoral focus will use

the mandatory energy audits as the main assessment tool to define eligible investments.

The government will also promote energy audits in small and medium-sized enterprises

that are not under the directive’s obligation. To date, however, the success of energy audits

in Spain is unclear. Rather than enforcing audits through a penalty system, the government

could consider boosting incentives to businesses to increase compliance.

In the buildings sector, Spain has implemented the EU Energy Performance of Buildings

Directive. The Technical Building Code was amended to introduce new energy efficiency

requirements, including improvements in the nearly-zero energy buildings definition. The

Regulation of Thermal Installations in Buildings and the Energy Performance Certification

will also be amended, in accordance with the directive.

The programmes for the Energy Rehabilitation of Existing Buildings (PAREER-CRECE

and PAREER II), with a budget of EUR 404 million, supported the energy renovation of

existing buildings from 2013 to 2018, enabling the renovation of around 80 000 homes

through measures to improve the energy efficiency of the thermal envelope (facades, roofs

and walls); thermal installations for heating, air conditioning and hot water (including solar

thermal); lighting installations; and substitution of conventional energy for biomass and

geothermal energy. A similar programme was recently approved, with a budget of

EUR 300 million until 2021, and may be extended until 2030, using the energy certificate

as the basis for public support. Given that the existing building stock consumes around

30% of final energy, its renovation is a priority; the NECP set a target of 1.2 million home

renovations by 2030. This objective has also been included in the Long-Term Strategy for

Energy Retrofitting in the Building Sector in Spain.

Regarding public buildings, Article 5 of the EED requires that 3% of the total floor area of

buildings owned by the central government be renovated each year to comply with at least

the minimum energy performance requirements established in the Energy Performance of

Buildings Directive. From 2014 to 2019, 1 626 214 m² were renovated, which represents

94% of the objective to 2020. The NECP foresees, from 2021, a renovation rate of

300 000 m

/year and extends this obligation to all autonomous regional and local

administrations. Given that the public sector represents a sizeable share of the market for

energy efficiency in Spain, robust implementation frameworks in this sector are critical.

Energy efficiency requires strong co-ordination of national, regional and local authorities.

At the national level, MITERD is responsible for energy policy and legislation, through the

Secretary of State for Energy. The General Sub-Directorate for Energy Efficiency and the

Institute for Energy Diversification and Saving are key players and report to the Secretary

of State. In Spain, energy efficiency policies and measures are often implemented at the

regional and municipal level, so MITERD develops these policies and measures in

co-ordination with the autonomous communities. These organisations should continue to

work hand-in-hand in a proactive development of appropriate policy options,

4. ENERGY EFFICIENCY

ENERGY SYSTEM TRANSFORMATION

implementation and follow-up. There is also a need for multi-level stakeholder dialogue,

including business, non-governmental organisations, and regional and local stakeholders,

which are ultimately responsible for implementing many of the energy efficiency measures.

Furthermore, bolstering the technical capacity of central, regional and local governments

to hold tenders, monitor audits and implement the identified measures will be a critical

element to helping meet efficiency targets, especially in the industry and buildings sectors.

Recommendations

The government of Spain should:

 Step up implementation of measures that support the renovation of existing buildings

in order to improve energy performance and thermal comfort. Prioritise deep

renovation of public buildings and residences owned or rented by vulnerable

consumers in order to reduce energy poverty and increase thermal comfort.

 Accelerate the deployment of public charging infrastructure for electric vehicles and

support an infrastructure expansion to enable a modal shift of goods and passengers

from road to rail.

 Consider an obligation on companies to implement measures that emerge from energy

audits with short payback periods; also, use information from energy audits to prioritise

financial support for specific energy efficiency measures.

 Enhance the technical capacity of central, regional and local governments to include

energy efficiency criteria in tenders, and monitor the effectiveness of energy efficiency

audits.

References

IEA (International Energy Agency) (2021), “World energy balances”, IEA World Energy

Statistics and Balances (database), www.iea.org/statistics.

IEA (2020), Energy Efficiency Indicators 2020 (database), www.iea.org/statistics.

Morgan, S. (2020), Spain Underpins Car Sector Bailout with Green Goals, EURACTIV,

Brussels, www.euractiv.com/section/transport/news/spain-underpins-car-sector-bailout-

with-green-goals.

ENERGY SYSTEM TRANSFORMATION

5. Renewable energy

Key data

(201

Renewables in total final energy consumption (TFEC):

13.8 Mtoe/17.3

% of TFEC

(bioenergy*

6.4 Mtoe, wind 4.1 Mtoe, hydro 1.8 Mtoe, solar 1.5 Mtoe)

IEA

median (2018): 15.5% of TFEC

Renewables in electricity generation:

101.1 TWh/37.3%

of total electricity generation

(wind

55.7 TWh, hydro 24.7 TWh, solar 15.1 TWh, bioenergy* 5.6 TWh)

IEA

median: 38% of electricity generation

Bioenergy includes solid primary biofuels, liquid biofuels and biogases, and excludes non-renewable industrial and

municipal waste.

Renewable energy in total final energy consumption

Renewable energy in total final energy consumption (TFEC) in Spain consists mainly of

renewable electricity, which covers more than half of renewables use, but also includes

direct use of bioenergy for heat and transport (Figure 5.1). However, while more than

one-third of electricity was produced using renewable energy in 2019, only 16% of energy

used for heat came from renewable energy in 2018 and an even lower share (6%) was

recorded in the transport sector, where the introduction of renewable energy is more

challenging.

Renewable electricity was generated mainly using wind and hydro in 2019, covering

together almost one-third of total electricity generation, with additional relevant shares of

solar and bioenergy. Renewable heat and transport were instead dominated by the use of

biofuels, with small shares of solar in heat and renewable electricity in transport.

5. RENEWABLE ENERGY

Figure 5.1 Renewable energy in total final energy consumption in Spain, 2019

Significant shares of wind, hydro and solar brought the share of renewables in electricity up

to 37% in 2019. Bioenergy was instead the main renewable source for heat and transport.

* Heat share of renewables refers to 2018.

** Bioenergy includes solid primary biofuels, liquid biofuels and biogases, and excludes non-renewable industrial and

municipal waste.

Notes: Mtoe = million tonnes of oil equivalent. Heat includes direct use of renewable energy and renewable district

heating in industry, and residential and service buildings (including agriculture). Electricity refers to final electricity

consumption in the same sectors, with the breakdown by fuel based on domestic electricity generation. Electricity

used for heating is included under electricity due to limitations in statistical data collection.

Source: IEA (2021), IEA World Energy Statistics and Balances (database), www.iea.org/statistics.

The use of renewables in TFEC increased by 35% in the decade between 2009 and 2019

(Figure 5.2). A significant increase in electricity from wind drove this growth; in 2019, wind

power generated more than 55 terawatt hours (TWh). Solar energy has also experienced

a significant increase in recent years, with its contribution increasing twofold between 2009

and 2019. Bioenergy and hydro have contributed to Spain’s renewable supply for longer,

though energy supply from bioenergy also increased by 23% in the decade 2009-19, while

electricity from hydro has experienced fluctuations caused by variability in water supply

over time.

The increase in renewables share was particularly strong between 2005 and 2013,

increasing by 133% in eight years. However, since 2013, renewable energy in TFEC has

stabilised, with only a 1.6% increase in the five years between 2013 and 2018. This was

caused by a marked slowdown in the installation of wind and photovoltaic (PV) plants, after

a sizeable reduction in previous feed-in tariffs.

10%

15%

20%

25%

30%

35%

40%

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Electricity

Heat*

Transport

Mtoe

Renewable electricity

(in transport)

Solar

Bioenergy**

Wind

Geothermal

Hydro

Renewable share

(right axis)

5. RENEWABLE ENERGY

ENERGY SYSTEM TRANSFORMATION

Figure 5.2 Renewable energy in total final energy consumption in Spain, 2000-19

Renewable energy consumption grew by 35% in the decade 2009-19, mostly driven by

growth in renewable electricity from wind and solar.

* Geothermal contribution is minimal, but grew from 5.4 kilotonnes of oil equivalent (ktoe) in 2000 to 18.8 ktoe

in 2019.

** Direct use of bioenergy, including mainly solid primary biofuels used for heating in the residential sector and minor

shares of liquid biofuels used in transport and renewable district heat.

Note: Mtoe = million tonnes of oil equivalent.

Source: IEA (2021), IEA World Energy Statistics and Balances (database), www.iea.org/statistics.

Compared to other IEA member countries, in 2018, Spain had a share of renewables in

TFEC (17%) that was slightly higher than the IEA median of 16%. Its renewable mix was

equally divided between direct use of renewables and renewable electricity, with no

reported contribution from renewable district heat (Figure 5.3).

Figure 5.3 Renewable energy as share of total final energy consumption in IEA

countries, 2018

Spain ranked slightly higher than the IEA median for the share of renewables in TFEC

in 2018.

Source: IEA (2021), IEA World Energy Statistics and Balances (database), www.iea.org/statistics.

10%

12%

14%

16%

18%

20%

Mtoe

Geothermal

Solar

Wind*

Hydro

Bioenergy**

Share of renwables

(right axis)

10%

20%

30%

40%

50%

60%

70%

Renewable electricity

Renewable district heat

Direct use of renewables

IEA. Al l ri ghts reserved.

5. RENEWABLE ENERGY

The low renewables share in transport is common in most IEA member countries; Spain

ranks 11th with 6%, though in many countries the share of renewables in transport was

below 5% in 2018.

Renewable energy in electricity

Growth of wind power in recent years drove a sizeable increase in Spain’s renewable

electricity in the first decade or so of the 2000s (Figure 5.4). Wind and solar contributed to

21% and 6% of total electricity generation, respectively, in 2019. This strong increase,

combined with the installation of many PV plants since 2007, doubled the share of

renewables in the national electricity mix, from 20% in 2008 to 40% in 2013. However, in

the following years, the share of renewables in electricity plateaued, to reach 37% in 2019.

Electricity from bioenergy also increased by 60% between 2009 and 2019, but its share in

Spanish electricity generation was still only 2.1% in 2019. In the same decade, hydro made

a fluctuating contribution to total electricity generation, ranging between 7% and 14%, due

to the variability of water supply.

The EU methodology for calculating the renewable share in electricity generation uses

normalisation formulas for generation from hydropower and wind. This normalisation has

the effect of smoothing the contribution of hydro, as it averages the capacity factor of

hydroelectric power plants over 15 years. As a result, Spain’s share of renewables in

electricity for the purpose of estimating progress towards EU renewable energy targets

grew from around 28% in 2009 to 37% in 2019.

The increase in wind generation was particularly strong between 2000 and 2013, when

installed capacity rose from 2.2 gigawatts (GW) to 22.9 GW. While installed wind capacity

has stalled since then, and stood at 23.3 GW in 2018, it picked up again to 25.5 GW

in 2019. Installed PV capacity had also plateaued since 2013, after growing from only

476 MW in 2007, but staged an impressive recovery in 2019 to 8.97 GW.

The share of electricity generation from renewables in Spain in 2019 (37%) was close to

the IEA median (38%) (Figure 5.5). In terms of the share of wind, however, Spain ranked

sixth-highest, after Denmark, Ireland, Luxembourg, Portugal and Germany. Meanwhile, it

ranked seventh-highest for the share of solar.

5. RENEWABLE ENERGY

ENERGY SYSTEM TRANSFORMATION

Figure 5.4 Renewable energy in electricity generation in Spain, 2000-19

A significant increase in wind and solar has doubled the share of renewable electricity

generation over the last decade.

* Bioenergy includes solid primary biofuels, liquid biofuels and biogases.

Note: TWh = terawatt hour.

Source: IEA (2021), IEA World Energy Statistics and Balances (database), www.iea.org/statistics.

Figure 5.5 Renewable energy as a share of total electricity generation in IEA

countries, 2019

The share of renewables in electricity generation in Spain is close to the IEA median. Spain

ranks fifth in terms of its share of electricity generation from wind.

Source: IEA (2021), IEA World Energy Statistics and Balances (database), www.iea.org/statistics.

Institutional responsibilities

The Ministry for the Ecological Transition and the Demographic Challenge (MITERD),

through the Secretary of State for Energy, is responsible for national renewable energy

policy. Article 3 of Law 24/2013 on the Electricity Sector includes authority granted to the

federal government in this matter, including the establishment and granting of

remuneration for renewable electricity generation facilities. It also gives the central

government authority over peninsular installations for electricity production with installed

capacity greater than 50 MW, electricity installations greater than 50 MW of capacity

located in non-peninsular territories whose electrical systems are effectively integrated

10%

15%

20%

25%

30%

35%

40%

45%

100

120

2000 2002 2004

2006 2008 2010 2012 2014 2016

2018

TWh

Hydro

Bioenergy*

Wind

Solar

Renewables share

(right axis)

20%

40%

60%

80%

100%

Biofuels and waste

Solar

Geothermal Wind Hydro

5. RENEWABLE ENERGY

with the peninsular system, as well as facilities that exceed the territorial scope of an

autonomous community and those located in the territorial sea.

The three main bodies under the Secretary of State for Energy for the development and

implementation of renewable energy policy are: 1) the Directorate General for Energy

Policy and Mines, which oversees regulatory issues: 2) the Institute for Diversification and

Energy Savings (IDAE), whose main objective is to finance energy efficiency measures,

including the integration of renewables; and 3) the Just Transition Institute, which finances

alternative projects in regions impacted by the energy transition, including promoting

renewables-based projects.

The autonomous communities can authorise new generation plants with capacity less than

50 MW, which in the past included most renewables projects, but in recent years, the

average project size has increased considerably. The autonomous communities, together

with local administrations, are involved in the development of policies and the

implementation of programmes to support the use of renewable energy in heating and in

isolated electricity networks.

The National Commission of Markets and Competition (CNMC) is the regulator,

responsible for carrying out the remuneration payments for renewable electricity

generation facilities. It is also responsible for managing the system of guarantees of origin

of electricity from renewable sources and high-efficiency co-generation. Moreover, the

CNMC was designated as the biofuel certification body, responsible for delivering

certificates and verifying compliance with biofuels targets by obligated parties, though on

1 January 2021, this responsibility was transferred to MITERD.

Renewable energy policy

Renewable energy targets

Spain’s renewable energy policy is aligned with EU 2020 targets, which set a binding

national target for renewable energy to equal 20% of gross final consumption of energy

(including 10% in transport). Spain’s targets on renewable energy for 2020 and the policies

and measures to meet them were initially laid out in the National Renewable Energy Action

Plan 2011-2020, which set a national 2020 target of 20.8% of renewable energy in gross

final energy consumption. Spain expects to reach a 20% share of renewables in gross final

energy consumption in 2020, up from 18.4% in 2018.

Spain is now looking to its 2030 targets. Overall, its National Energy and Climate Plan

(NECP) expects to achieve a 42% share of renewables in total end use of energy by 2030,

well above the EU-wide target of 32%. This level will be led by the power sector, where

the plan projects the share of renewables to grow from 42% in 2020 to 60% in 2025 and

74% in 2030. This will put Spain on a pathway toward achieving its 2050 objective to

source 100% of its power from renewable sources, in line with its 2050 carbon neutrality

goal. For heating and cooling, the NECP forecasts the share of renewables to grow from

18% in 2020 to 25% in 2025 and 31% in 2030. Lastly, the share of renewables in the

transport sector is expected to grow from 10% in 2020 to 15% in 2025 and 28% in 2030.

Spain’s domestic targets are embodied in the Bill on Climate Change and Energy

Transition, which establishes targets for renewables in overall energy consumption and in

5. RENEWABLE ENERGY

ENERGY SYSTEM TRANSFORMATION

electricity generation that are similar to those outlined in the NECP. The Bill on Climate

Change and Energy Transition was accepted by the government in May 2020 and is

currently in parliament for debate and eventual approval.

Renewables in electricity

The overall penetration of renewables in energy will be led by the power sector, where the

NECP projects the installation of about 60 GW of new renewable generation through 2030

(almost 6 GW annually), led by wind and solar, amounting to 74% of total electricity

generation that year. For solar PV, the government anticipates capacity growth of around

30 GW, from 9 GW in 2020 to 21.7 GW in 2025 and 39.2 GW in 2030. For wind, the plan

envisages total growth of 22 GW, from 28 GW in 2020 to 40.6 GW in 2025 and 50.3 GW

in 2030.

Spain’s support mechanisms for renewable electricity have seen significant changes in the

past decade. After Spain introduced a Special Regime for the Promotion of Renewable

Energy in 1997, wind installations picked up considerably. Following Royal

Decree 661/2007, which granted priority access to the grid, more favourable conditions for

larger facilities and a revision of feed-in tariff rates only every four years, solar PV

installations also surged (Gürtler, Postpischill and Quitzow, 2019).

In 2012, the government began a comprehensive reform of the sector. The approval of

various legislative texts, such as Law 24/302013 and Royal Decree 413/2014, resulted in

a new income and expenditure regime for different actors in the electricity system and an

adjustment in the remuneration for electricity from renewable energy sources,

co-generation and waste, which discouraged new development. As a result, while the

increase in wind generation was particularly strong between 2000 and 2013 when installed

capacity rose from 2.2 GW to 23.0 GW, installed capacity stalled after 2013, and was still

23.4 GW in 2018. Solar PV followed a similar trend.

Based on Law 24/2013 on the electricity sector and Royal Decree 413/2014, the

remuneration regime is made up of:



an amount per unit of installed capacity that covers the investment costs for each

installation that cannot be recovered by the sale of energy in the market



an amount related to the operation of a facility to cover the difference between the

operating costs and the standard operating income of a reference facility.

The remuneration parameters are periodically reviewed and revised to reflect market

developments. Specifically, the operating remuneration of standard facilities, whose

variable costs depend mainly on fuel costs, are updated at least annually. The income

estimates of standard installations for the sale of energy valued at the market price, as

well as the remuneration parameters directly related to these, may be reviewed every three

years. The remaining (more stable) variables can be reviewed every six years, including

reasonable profitability (which is modified by law). The initial standard value of investment

and the useful life of an installation cannot be reviewed at any time once they are set for

each installation.

Several auctions have been organised since 2015 to support the installation of new

renewables facilities (Table 5.1).

5. RENEWABLE ENERGY

Table 5.1 Renewables auction results in Spain

Year

Auction

Capacity in operation per technology (MW)

Total

Biomass

Wind

Other

technologies

2016

(January)

Wind and biomass

auction 2016

195.41

458.39

–

653.81

2017 (May)

First renewables

auction 2017

–

1 790.28

0.01

15.08

1 805.37

2017 (July)

Second renewables

auction 2017

–

143.40

3 718.22

–

3 861.62

TOTAL

195.41

2 392.07

3 718.23

15.08

6 320.79

Notes: MW = megawatt. PV = photovoltaics.

Renewable technologies in Spain participate in the market as conventional ones. The

support that they receive is granted on top of their market revenues. Additionally, they

have balancing obligations and can participate in ancillary services, receiving the market

remuneration of those services on top of the previously mentioned revenues.

Looking ahead, to achieve its ambitious targets for renewables in electricity (74% in the

NECP for 2030), Spain envisions a three-pronged strategy: 1) the promotion of large

generation projects; 2) the deployment of own consumption and distributed consumption;

and 3) measures to integrate renewables into the electricity system and market.

The market itself (merchant projects, power purchase agreements [PPAs], etc.) will not be

sufficient to reach the ambitious capacity targets embodied in the NECP for the period

2021-30. As such, the NECP considers auctions to be the main policy support tool for the

development of these technologies, in accordance with EU Directive 2018/2001 on the

promotion of the use of energy from renewable sources.

Costs have dropped considerably for mature renewables technologies and they can

compete with conventional technologies, but there is still sizeable uncertainty regarding

the evolution of electricity spot market prices. The expected reduction of wholesale prices

is having a negative impact on financing costs and conditions. Therefore, the government

aims to minimise the amount of public expenditure required, but at the same time provide

certainty to investors by approving a new support scheme based on competitive tendering

mechanisms. Technologies that have not yet reached maturity (e.g. deepwater offshore

wind, marine energy) can also opt for this public support mechanism that will be offered

as part of the tendering process. The government also places a strong emphasis on

community projects.

The Bill on Climate Change and Energy Transition initially called for at least 3 000 MW to

be auctioned each year, with revised remuneration frameworks based on long-term

recognition of a fixed price for the energy generated. However, this target was removed in

the final version approved by the government in May 2020 to allow more flexibility on

auction sizes based on market and technological conditions (Baratti, 2020a).

Overall, the government plans to auction around 5 GW of renewables capacity annually,

though additional capacity will be needed to meet its targets, likely coming from corporate

PPAs, utility bilateral contracts or self-consumption (see below). In December 2020, the

government announced an indicative calendar of auctions for 2020-25, outlining minimum

volumes of capacity for each technology. The calendar will be updated annually.

5. RENEWABLE ENERGY

ENERGY SYSTEM TRANSFORMATION

Table 5.2 Spain’s renewable energy auction calendar

Technology

2020

2021

2022

2023

2024

2025

Minimum total cumulative power (MW)

Wind

1 000

2 500

4 000

5 500

7 000

8 500

Solar PV

1 000

2 800

4 600

6 400

8 200

10 000

Solar thermal

200

400

600

Biomass

140

260

380

Other (biogas, hydro, ocean, etc.)

Notes: MW = megawatt. PV = photovoltaics.

Source: Energías Renovables (2020), “Este es el calendario de subastas de renovables 2020-2025”,

www.energias-

renovables.com/panorama/este-es-el-calendario-de-subastas-de-20201205.

New auctions will be conducted on electricity generation (MWh), capacity (MW) or a mix

of the two. The new mechanism is based on a recognition of a price per unit of energy

during a period of time and for a maximum amount of energy. In each tender, the product

to be auctioned will be energy or capacity. It may be that a specific amount of energy and,

additionally, certain capacity will be included in the same auction, but this would be done

independently. The participant will not choose whether to bid for capacity or for energy. It

will be predefined, although developers can participate in both options, for different

projects. In cases where the auctioned product is capacity, the energy that will participate

in the mechanism will be calculated by multiplying the capacity by an approved number of

equivalent hours by the number of years. In tenders were participants bid for energy, the

maximum number of equivalent hours will be used for calculating the minimum capacity

that needs to be installed in order to minimise the risk of not delivering the minimum

amount of energy. In principle, all renewable technologies could be supported, although

specific auctions might be conducted for technologies that have certain characteristics

(i.e. dispatchability, storage, etc.). Nevertheless, the majority of participation is expected

to come from solar PV and wind, as stated in the NECP, due to their costs and the available

resources in Spain.

In the latest renewable auction held in January 2021, the government awarded 2.036 GW

of solar PV and 998 MW of wind capacity at an average price of EUR 24.47/MWh.

The government has also taken steps to address a grid access backlog that emerged in

the past year with legislation passed in June 2020 (Royal Decree-Law 23/2020). A number

of developers had been securing grid access without the requisite means to develop

projects, creating a speculative secondary market for grid access permits. In response,

the government issued a three-month time limit as part of the permitting process to

advance a project; failure to do so will cause projects to lose permits and deposits

(Djunisic, 2020). The changes allowed the government to clear an enormous and fictional

backlog of around 430 GW of grid access applications (Baratti, 2020b).

Offshore wind, in particular, is seen as an important opportunity. Toward this end, the

government is currently working on an offshore Wind Roadmap after completing a public

consultation on 5 July 2020, spearheaded by the IDAE in collaboration with the Secretary of

State for Energy. The main focus will be to enable technological and commercial maturity of

floating technologies for application in deep waters in the Atlantic Ocean and the

Mediterranean Sea. Research and innovation platforms are being developed (BIMEP in the

Basque Country, PLOCAN in the Canary Islands), with a special focus on islands, which

have isolated electricity systems, high costs of energy and low penetration of renewable

energies. Already, plans in the Canary Islands have received international interest.

5. RENEWABLE ENERGY

Order TED/1380/2018 established the regulatory basis for granting investment aid to

installations that generate electricity using wind and PV located in non-peninsular

territories, co-financed with ERDF and other regional funds. The IDAE is in charge of

approving the calls under this programme and oversees EUR 170 million through four

auctions: 1) wind facilities in the Canary Islands; 2) PV facilities in the Balearic Islands;

3) PV facilities in the Canary Islands; and 4) a second call for wind facilities in the Canary

Islands.

The subsequent Order TED/766/2020 established a regulatory framework for granting

support from the ERDF and other funds to renewable electricity facilities throughout the

national territory, worth EUR 110 million in competitive tenders. The funds under these

programmes are designated for facilities that do not participate in the general auctions.

Beyond auctions, Spain has also witnessed notable success with corporate and utility

PPAs in the past three years, led by solar power, with some of the highest levels in Europe

(Bektas, 2020). Though the government does not offer explicit support to promote PPAs,

the overall climate change agenda and renewables targets set by the government have

helped motivate corporate interest, as has the country’s abundant resource endowment

(especially solar).

Spain’s targets for renewables in electricity will require a sizeable buildout of new

generation facilities. However, like in many other countries, new renewables installations

can face local opposition in Spain, notably for wind. The government sees the development

of renewable energy communities as a way to increase public support for projects.

Moreover, permitting procedures in Spain can be lengthy and uneven across regions,

especially in cases where environmental opposition is strong. Though the Renewable

Energy Directive recommends a two-year permitting cycle and the majority of viable

projects take approximately that long, some projects facing challenges can take

significantly longer.

In addition, the NECP includes planned measures to upgrade electrical networks for the

integration of renewables by adapting transmission and distribution network planning

through the creation of new transmission nodes and the strengthening of existing ones, as

well as the development of new international interconnections and underwater lines (see

Chapter 7). Grid codes are also expected to be updated to keep up with changing

technological developments and digitalisation, as is the definition of network connection

capacity.

The NECP also foresees 6 GW of electricity storage capacity to be in place by 2030. In

February 2021, the government released a National Storage Strategy to support the goals

of the NECP. The strategy expands the storage necessities of Spain’s energy system;

beyond the referred capacity envisaged in the NECP, the strategy includes capacity from

the electric vehicle fleet, behind-the-meter energy storage systems and large-scale energy

storage attached to concentrated solar plants, which could result in total storage capacity

of around 20 GW in 2030.

Self-consumption and distributed generation

The government also plans to expand self-consumption of renewables and distributed

generation, which it considers an important component in the growing share of renewables

in electricity generation (see Chapter 7).

5. RENEWABLE ENERGY

ENERGY SYSTEM TRANSFORMATION

Notably, in 2018, the government abolished a so-called “sun tax”, which was a levy applied

on self-consumption installations of greater than 10 kilowatts (kW) of capacity connected

to the grid. The tax was considered a major deterrent to rooftop solar installations in homes

and small businesses. As a result, the business case for self-consumption has

considerably improved compared to previous years, and is expected to be the main driver

to boost uptake.

In addition, Spain recently updated its regulatory framework with respect to

self-consumption in an effort to support growth. Royal Decree 244/2019 (to implement EU

Directive 2018/2001 on the promotion of the use of energy from renewable sources) put

in place clearer definitions of self-consumption, simplified compensation schemes, and

streamlined technical and administrative requirements.

The royal decree defines both individual self-consumption and so-called collective

self-consumption, which is comprised of several participants. The government sees

collective self-consumption as an attractive opportunity to expand renewables capacity as

it offers more efficient use of limited space in urban areas as well as lower investment

costs per user and the ability to share technical, administrative and operational knowledge.

Moreover, the royal decree also enabled the participation of new agents in

self-consumption schemes, notably energy service providers that have technical

know-how in the field. The administration expects this measure to reduce previous barriers

to entry for self-consumption, as energy service providers can offer the best and latest

technical solutions.

Renewables in heating and cooling

Spain’s NECP includes ambitious plans to double the contribution of renewables in the

heating and cooling sector by 2030, from 16.8% in 2015. The Renewable Energy Directive

calls on member states to increase the share of renewables in heating and cooling by 1.3%

annually from the level achieved in 2020 (1.1% if residual heat is excluded). However,

Spain expects that the measures outlined in the NECP would make it possible to exceed

this level of penetration.

In particular, the government is looking to expand district heating and cooling installations

that use renewable sources from currently low levels (see Chapter 4). At present, just

0.15% of the heating and cooling sector uses district heating and cooling networks.

The government is currently undertaking a study on the potential of energy from renewable

sources in the sector and on the use of waste heating and cooling, which is expected to

be completed in 2021. Among other things, the assessment will include: an estimate of

heating and cooling demand by sector; an estimation of current heating and cooling supply

by technology; identification of any installations that generate waste heat or cooling and

their potential for providing heating or cooling; a forecast of demand trends for heating and

cooling over the next 30 years; an analysis of the economic potential of various

technologies, including heat pumps; and an overview of the legislative and non-legislative

measures that will enable this economic potential. The result of this evaluation will inform

future policy actions for renewables in the heating and cooling sector. The government

also plans to impose a minimum share of renewables for heating and cooling, along with

financial support for eligible entities.

5. RENEWABLE ENERGY

Led by the Ministry of Transport, Mobility and Urban Agenda, the government also plans

to review and increase the energy efficiency and renewable energy requirements in the

Technical Building Code, as well as the minimum requirements to be met by thermal

installations, by means of the Regulations on Thermal Installations in Buildings, for all new

buildings and refurbishments.

According to the NECP, the government (through the Ministry of Transport, Mobility and

Urban Agenda) plans to enact financial support schemes for renewables installations in

buildings or heating networks, with a particular emphasis on: upgrading solar thermal

facilities; high-efficiency ambient energy equipment; upgrading biomass equipment with

other high-efficiency equipment; geothermal facilities with heat pumps and direct use;

hybrid systems of renewables technologies to achieve nearly-zero energy buildings; and

integrated, standardised and compact heating and cooling installations.

The Ministry of Finance will also analyse the impacts of possible changes to the fiscal

framework that would help to incentivise electrification and the use of renewables for

thermal requirements relative to fossil fuels.

In 2020, two ministerial orders were approved establishing the basis for granting aid under

a competitive system to installations for the production of electricity and heat from

renewable energy sources, capable of being co-financed with ERDF funds. The aid –

EUR 300 million in total – will take the form of grants, which may be accorded to the

beneficiary by means of an advance, in order to facilitate the financing of projects. The

projects selected in each call may be co-financed with ERDF funds. Renewable energy

communities and district heating and cooling projects can be considered as part of the

programme. Implementation and the budgetary allocation of the programme is carried out

in close collaboration with the autonomous communities. Biomass will receive the largest

portion of the budget at 34%, followed by solar thermal at 26%, renewables gases/biogas

at 20%, geothermal at 13%, aerothermal at 6%, and district heating and cooling at 1%.

Support for renewables in heating and cooling has also been provided in the form of

financial support to new projects of thermal production from renewable energy sources

managed by energy service companies.

Additionally, the government provides financial support for energy efficiency renovations

through the Energy Rehabilitation of Existing Buildings (PAREER) programme (see

Chapter 4). The PAREER programme has a group of measures to promote the

development of solar, biomass and geothermal energy in the residential sector.

Renewables in transport

Since the adoption of EU Directive 2009/28 in April 2009 on the promotion of the use of

energy from renewable sources, renewable energy has taken on a particularly relevant

role in the transport sector. The directive set an objective for the transport sector, obliging

each member state to achieve a minimum share of 10% of renewables in final energy

consumption in the transport sector in 2020.

In Spain, the promotion of the use of biofuels was given fresh momentum most recently in

late 2015 with Royal Decree 1085/2015, which set new minimum and mandatory annual

sales and consumption targets (4.3%, 5%, 6%, 7% and 8.5%, for the years 2016, 2017,

2018, 2019 and 2020, respectively). Obligated parties – which include wholesale operators

of petroleum products, retail distributors of petroleum products and consumers not covered

5. RENEWABLE ENERGY

ENERGY SYSTEM TRANSFORMATION

by the aforementioned parties – can achieve the targets in a flexible manner through

biofuels certificates for either diesel or gasoline. There is also a cap of 7% for

first-generation biofuels within the targets. Moreover, the regulation also introduced an

indicative objective of 0.1% energy content for advanced biofuels in 2020.

Biofuels are, therefore, the primary means for meeting the targets of renewable energy in

transport. Among the various types, biofuels blended with or substituting for diesel

(biodiesel and hydrotreated vegetable oil) are especially significant, since they account for

91% of biofuels sold or consumed in the transport sector, while bioethanol represents only

9%.

The remaining 1% of renewables in transport is made up of electrical energy produced

from renewable sources and consumed in transport. It is mainly provided (90%) by

electrified rail transport, where the consumption of electricity in absolute terms is higher

than electricity consumption in road transport vehicles.

To continue promoting the use of renewable fuels in transport, MITERD is working on the

implementation of the second EU Renewables Directive, which establishes a final

objective for the penetration of renewables in transport of 14% in 2030. Furthermore,

specific objectives for advanced biofuels were set for 2022 (0.2%), 2025 (1%) and 2030

(3.5%). In April 2020, the ministry launched a public consultation in order to transpose part

of this directive, which was completed in September 2020. The new regulation will

establish updated obligations for the share of biofuels in the transport sector, in line with

the requirements of the directive. For 2021 and 2022, the government has already

proposed mandatory blending levels of 9.5% (with a 0.1% indicative target by energy

content for advanced biofuels) and 10% (0.2% for advanced biofuels), respectively, in

order to send a clear signal to the industry. The 7% cap on first-generation biofuels will

remain in place, and a 1.7% cap on biofuels from unused cooking oil and animal fats was

introduced.

The overall objective for renewable energy, in line with goals to decarbonise transport, will

be achieved by reducing consumption (such as by promoting modal shifts) and with the

contribution of different technologies (mainly biofuels and renewable electricity).

To increase the use of renewables-based electricity in the transport sector, the government

established a target to put 5 million electric vehicles (EVs) on the road by 2030. Policies

to this end include lower vehicle registration taxes for EVs and financial support to the

domestic automotive sector to increase the production of electric models. To further

support the uptake of EVs, Spain is actively promoting the deployment of electric charging

infrastructure from relatively low levels at present (see Chapter 4).

Spain’s NECP promotes the use of advanced biofuels in the transport sector as one of the

measures to decarbonise the energy system. In particular, biofuels will likely be the most

viable solution to decarbonise several subsectors in the medium term, such as heavy

vehicles and aviation.

At present, however, advanced biofuels production in Spain is very low, in some cases

constrained by the limited availability of feedstocks and technological difficulties in

achieving commercial-scale production. In order to increase the penetration of advanced

biofuels beyond the general obligation for the sale and consumption of biofuels, the NECP

foresees several measures, including: adapting the certificate system to cover advanced

biofuels and biomethane; providing financial aid for advanced biofuel production facilities;

5. RENEWABLE ENERGY

promoting facilities that produce renewable fuels with non-biological feedstocks;

establishing a discrete obligation for the sale and consumption of advanced biofuels

in 2021-30; promoting labelling of biofuels blends at retail stations; and establishing

specific obligations for biofuels in aviation.

As a result of the measures adopted in the NECP, a 28% share of renewable energy

sources is projected in transport through electrification and biofuels, well above the 14%

required by the EU in 2030.

Renewable gases

Spain sees renewable gases as an important future source and carrier of energy given

that it can be used across multiple sectors, including electricity, transport and industrial

processes. To this end, the government has plans to promote the use of biogas,

biomethane and hydrogen from renewable sources.

To date, the main renewable gas in Spain’s energy system has been biogas. However,

the government finds that Spain has fallen short of its biogas potential, accounting for just

1.4% of European biogas supply. Existing remuneration schemes for electricity generation

at biogas plants in Spain have not proven effective at boosting its uptake. More recently,

Spain has been looking into the option of upgrading biogas into biomethane to inject into

natural gas networks. Of over 500 biomethane plants in Europe, only 2 of them are in

Spain. In the short and medium term, the government’s focus will be on boosting the

production and consumption of biogas and biomethane, while it sees renewables-based

hydrogen as an important longer term opportunity.

According to “Measure 1.8: Promotion of renewable gases” of the NECP, several technical

and administrative barriers and mechanisms to boost the use of renewable gas exist today.

Among the main barriers, the NECP identifies:



the high cost of producing gas from renewable sources compared to gas produced from

fossil fuels



no system of guarantees of origin to trace the source of renewable gas



the need to clarify the rights, obligations and responsibilities of all agents participating in

the production, transport and marketing of renewable gas



the need to clarify connection and access conditions



lack of awareness among end consumers regarding equipment safety



limited renewable gas stations.

To tackle these barriers, the plan calls for the development of road maps for renewables

gases to assess their potential in Spain. The road maps will include projecting supply

potential and demand, assessing technological viability and economic feasibility, as well as

considering benefits to system flexibility and potential use in existing natural gas networks.

The road maps are also expected to propose aid mechanisms, a system of guarantees of

origin, removal of regulatory barriers and regulations related to injection into gas networks.

To this end, the government is in the process of developing a Biogas Roadmap. An initial

public consultation ended in June 2020 and several working groups are currently putting

together a draft road map, which will then be released for public comment before being

finalised. The issue of injecting biogas/biomethane into existing grids was a particular

focus area on which the government requested stakeholders’ inputs.

5. RENEWABLE ENERGY

ENERGY SYSTEM TRANSFORMATION

For hydrogen, Spain currently has a consumption of around 500 000 tonnes/year of mostly

grey hydrogen (made from fossil fuels), which is mainly used as a raw material in refineries

(around 70%) and chemical product manufacturing (25%).

In October 2020 the government approved a Hydrogen Roadmap “A Commitment to

Renewable Hydrogen”. The Hydrogen Roadmap is the main tool to guide and promote the

development of renewable hydrogen in Spain, taking into account the major role that it can

play in the energy transition towards a decarbonised economy in 2050 as a flexible energy

vector. This road map is consistent with the European Hydrogen Strategy and in line with

the Bill on Climate Change and Energy Transition and the Long-Term Strategy of Spain in

terms of the promotion of renewable gases, especially renewable hydrogen. The road map

clearly identifies the environmental, economic and social benefits of hydrogen and

indicates which sectors will offer attractive opportunities for hydrogen deployment. It

provides a vision for 2030 and 2050 with specific targets, mainly focused on the installation

of electrolysers as well as hydrogen use in industry and mobility. The targets will be revised

every three years in order to adapt the plan to technological developments and market

evolution.

Moreover, two hydrogen projects are currently in the implementation phase in Spain, one

in the fertiliser sector and one to convert an old cement plant to produce hydrogen for use

in mobility and thermal applications oriented toward tourism.

Assessment

In its NECP, Spain has set ambitious targets for renewables in its energy mix, aiming at

installing 122.7 GW of renewable electricity capacity by 2030, primarily wind and solar.

Overall, it aims for renewables to make up 42% of final energy consumption, 74% of

electricity generation and 28% in transport by 2030. In line with the EU’s climate-neutral

strategy, Spain also aims to achieve a 100% renewables share in the electricity sector

by 2050.

The share of renewables in electricity generation was 37% in 2019, on track to meet the

2020 target of 42%. Overall production of renewable energy increased by 47% between

2009 and 2019 to cover more than half of total domestic production in 2019. It should be

noted that renewables targets will be easier to achieve if Spain promotes the “energy

efficiency first” principle, and successfully implements its ambitious energy efficiency

target of reducing primary energy consumption by 39.5% by 2030.

However, so far the uptake of renewables has mostly been limited to the electricity sector.

Spain expects to reach a 20% share of renewables in gross final energy consumption

in 2020, up from 18.4% in 2019. Reaching the 2030 target of 42% will require additional

efforts in the transport and heating/cooling sectors, in particular.

Spain envisages installing 60 GW of renewables capacity from 2021 to 2030 (6 GW every

year via auctions), together with measures to facilitate the penetration of renewables in

the grid, such as increasing storage capacity by 6 GW and facilitating demand response

through demand aggregators. The NECP sees auctions as the main tool for the

development of renewable electricity. After a feed-in tariff scheme led to very strong growth

in wind and solar installations in the first decade or so of the 2000s, subsequent changes

in remuneration to existing facilities saw a marked slowdown in 2013, which continued until

5. RENEWABLE ENERGY

2018. However, in addition to corporate PPAs, recent auctions (based on a framework

introduced in 2014) have proven successful in boosting renewables capacity, including

achieving significant cost reductions thanks to competitive auctions. Most of these projects

have proceeded to enter into service after securing financing. As a result, installed wind

capacity reached 25.5 GW in 2019, an increase of 9% compared to 2018. PV staged even

more impressive growth after a period of stagnation over the last few years to increase

installed capacity by 88% in 2019 compared to 2018, to reach 8.9 GW.

However, going forward, sizeable additional capacity from wind and solar will be required

to reach the 2030 target. Overall, renewable capacity growth could be higher than the

targets if the full schedule of annual auctions proposed are implemented and the

differential between wholesale electricity prices and renewable generation costs increases

enough to trigger faster corporate PPA growth and even pure merchant plant deployment.

The new framework of a support scheme through auctions will help in this regard, as will

recent changes to address grid access backlogs. The government should strictly

implement its calendar of planned auctions to further improve investment clarity.

Given the scale of required deployment – most notably of wind – the Spanish government

should not underestimate other barriers. Onshore wind and other large-scale projects are

facing increasing social acceptance and land-use challenges. Addressing these issues will

require inclusive and transparent stakeholder consultation processes, along with allocating

some benefits of the energy transition to local communities and ensuring minimal

environmental disruptions. Planned new auction frameworks that include renewable

energy communities will help in this regard. Co-ordination between regional governments

and the central government will also be critical to ensuring local approval.

The development of renewable energy has been a priority of Spanish energy policy,

though the accelerated development of renewables generation that has taken place has

presented some challenges for the management of the operation of the electricity system,

especially given a very high number of small units of production scattered throughout the

country. That is why in February 2021 Spain released an Energy Storage Strategy, which

will help guide this important component that will improve flexibility in the electricity system

to support the increasing share of variable renewables. Other flexibility resources that

warrant increased attention are demand response programmes and increased

interconnection capacity to neighbouring countries, notably France.

The contribution of renewable energy in heating and cooling was around 16% in 2018. To

achieve the objectives set out in the NECP, it will be necessary to double this contribution

by 2030. Renewable heat faces several barriers, reflecting the complexity of the sector.

Achieving this ambitious target will require subsector strategies for different end uses in

buildings and industry. Several policy instruments are in place to support renewables in

buildings, but their ambition needs to be significantly strengthened. A number of options

could be considered to accelerate renewable heat expansion, including offering tax

deductions for deep renovations, putting a carbon price on non-ETS sectors, redistributing

revenues to incentivise energy efficiency and renewables deployment, and/or imposing

quota obligations. In a similar vein to the transport sector, the uneven distribution of taxes

on electricity versus oil and gas serves as a disincentive to electrification efforts in the

heating and cooling sector, and should be revisited. The government’s planned National

Fund for the Sustainability of the Electric System, which would reallocate the levies

associated with subsidies for renewables, co-generation and waste – currently borne

5. RENEWABLE ENERGY

ENERGY SYSTEM TRANSFORMATION

entirely by electricity consumers – to energy companies across the energy system, will be

an important step in this regard.

In the transport sector, the largest energy-consuming sector in 2019, more than 90% of

consumption was mineral oil, with only a small share of biofuels (5%) and a smaller share

of electricity (1%). The government set a mandatory blending target for biofuels in road

transport fuels over 2016-20 to reach 8.5% in 2020. The government is in the process of

translating NECP targets for 2030 into additional blending requirements for the coming

years. However, given limits on the use of first-generation biofuels and challenges securing

advanced biofuels at scale, electrification of the transport sector is also a critical

component of Spain’s plans to reach its renewables target of 28% by 2030. To this end,

the government has laid out a target of putting 5 million EVs on the roads by 2030,

supported by a buildout of electric charging infrastructure. While these measures will go a

long way towards reaching the targets, the government should consider changes to its

taxation schemes to lower the price of electricity compared to fossil fuels as a further

incentive for successful electrification of the transport sector.

In October 2020, the Spanish government approved the “Hydrogen Roadmap: A

Commitment to Renewable Hydrogen”, a strategic document completely aligned with the

EU strategy. Spain plans to support the production of hydrogen with regulatory and

sectoral instruments. Two projects are already in the implementation phase.

Recommendations

The government of Spain should:

 Closely follow the calendar of planned auctions for new renewable generation capacity

to further improve investment clarity and transparency for all participants; address local

opposition to siting of projects as part of the process.

 Develop additional tools to support the production and use of advanced biofuels and

provide financial support for households to switch to non-fossil heating options, such

as solar heating; encourage these options to be part of all building renovation policies.

 Prioritise “energy efficiency first” to help achieve a higher renewables share in the

heating/cooling and transport sectors; explore the full range of cost-effective

renewable heating/cooling options and further promote sector coupling to benefit from

renewable gas in the energy transition.

 Elaborate road maps and implement supporting measures in a timely fashion to

support innovation of renewable energies and raise awareness for the necessity of the

energy transition.

References

Baratti, G. (2020a), Spain Removes 3GW Target for RES Auctions in New Climate Law,

S&P Global, Barcelona, www.spglobal.com/platts/en/market-insights/latest-news/electric-

power/052020-spain-removes-3-gw-target-for-res-auctions-in-new-climate-law.

5. RENEWABLE ENERGY

Baratti, G. (2020b), Spain Passes Renewables Law to Tackle Grid Permit Backlog,

S&P Global, Barcelona, www.spglobal.com/marketintelligence/en/news-insights/latest-

news-headlines/spain-passes-renewables-law-to-tackle-grid-permit-backlog-

59193532#:~:text=Spain's%20government%20has%20passed%20a,100%25%20sustainab

le%20electricity%20by%202050.

Bektas, C. (2020), “PPAs in Spain to continue growing over this decade”, ICIS,

www.icis.com/explore/resources/news/2020/10/16/10563896/ppas-in-spain-to-continue-

growing-over-this-decade.

Djunisic, S. (2020), “Spain’s fat renewables backlog lighter by 39.6 GW since June law on

grid access – report”, Renewables Now, https://renewablesnow.com/news/spains-fat-

renewables-backlog-lighter-by-396-gw-since-june-law-on-grid-access-report-723614.

Energías Renovables (2020), “Este es el calendario de subastas de renovables 2020-

2025”, www.energias-renovables.com/panorama/este-es-el-calendario-de-subastas-de-

20201205.

Gürtler, K., R. Postpischill and R. Quitzow (2019), “The dismantling of renewable energy

policies: The cases of Spain and the Czech Republic”, Energy Policy, Vol. 133,

https://doi.org/10.1016/j.enpol.2019.110881.

IEA (International Energy Agency) (2021), “World energy balances”, IEA World Energy

Statistics and Balances (database), www.iea.org/statistics.

ENERGY SYSTEM TRANSFORMATION

6. Energy research, development and

innovation

Key data

(2018)

Public energy

RD&D budget: EUR 103 million

Energy RD&D

budget per GDP:* 0.085 per 1 000 GDP units (IEA median:** 0.316)

Energy RD&D budget per capita:

EUR 2.21 (IEA median:** EUR 12.9)

Gross domestic product in 2019 prices and exchange rates.

Median of 27 IEA member countries for which 2018 data are available.

Overview

Spain has a long-standing and well-developed national innovation system for energy

technology, and has been a very active participant in European Union (EU) energy

research programmes. Since 1990, fossil fuel research has represented less than 5% on

average of the annual public budget for energy research and development (R&D), and this

level has been at 1% since 2010, indicating an energy innovation system firmly focused

on clean energy technologies.

The central policy instruments are funding programmes for multi-year applied research

projects at public universities and in collaboration with the private sector. These

programmes are primarily managed by the Ministry of Science and Innovation, and have

been complemented over the past decade by various initiatives to support early-stage

companies, engage relevant stakeholders in the decision-making process and assist

large-scale demonstration projects.

Spain’s National Energy and Climate Plan (NECP) identifies R&D, innovation and

competitiveness as one of its five pillars, set out in accordance with the European Energy

Union principle, aiming to capitalise on opportunities for economic development and job

creation arising from innovation activities (EC, 2020a). The NECP acknowledges that since

2007, Spain’s institutional framework for innovation policy is designed to match that of the

European Commission, and has recently been updated to reflect the structure of the

European Commission’s next research framework programme, Horizon Europe. This

mirroring of the EU framework indicates the priority given to participation of Spanish

entities in competitive EU projects and securing the associated funding.

6. ENERGY RESERACH, DEVELOPMENT AND INNOVATION

A new National RD&D Strategy was approved in September 2020, which recognises the

current national energy transition ambitions as a key opportunity for innovation, and

designates climate, energy and mobility as one of its six pillars. This pillar of the strategy

has been designed to align with the NECP, and with other strategic policy documents,

including the Long-Term Strategy (LTS).

This chapter introduces the primary priority-setting documents, followed by the main actors

in Spain’s energy innovation ecosystem. The implementing actions and funding are then

described in sections organised by the pillars of the IEA framework for assessing energy

innovation policies (Box 6.1). The chapter closes with a review of Spain’s approach to

monitoring and evaluation of innovation performance and an overall assessment, followed

by five recommendations.

Box 6.1 IEA framework for energy innovation policies

Technology innovation processes are complex and decision makers must pay attention to

a variety of elements that characterise successful energy innovation systems (IEA, 2020a).

The IEA groups these elements into four core functions: 1) resource push; 2) knowledge

management; 3) market pull; and 4) socio-political support (Figure 6.1).

Figure 6.1 The IEA’s four functions of a successful innovation ecosystem for

energy

Source: IEA (2020a), Tracking Clean Energy Innovation, www.iea.org/reports/tracking-clean-energy-innovation.

While the appropriate policy measures to address each function can vary widely with the

size of a country’s economy, the technologies it prioritises and the strength of its existing

R&D base, successful energy innovation ecosystems have effective policies in each of the

6. ENERGY RESEARCH, DEVELOPMENT AND INNOVATION

ENERGY SYSTEM TRANSFORMATION

Energy innovation priorities and guiding documents

Spain’s energy R&D priorities are set out in a number of different documents, including the

NECP; the National RD&D Strategy; the Spanish Science, Technology and Innovation

Strategy; the national and regional scientific and technical research and innovation plans;

and the LTS.

The NECP groups priorities by thematic areas:



energy efficiency, recognised as a transversal research area impacting multiple sectors



renewable energy technologies, particularly those where Spain has a relatively

advantageous position (wind, solar PV and solar thermal electricity), or those where Spain

has “significant natural resources or a significant local implementation potential to impact

learning curves” (wave and marine energy, biomass, waste to energy, and enhanced

geothermal)



flexibility and energy system optimisation, including electricity and thermal storage and

hydrogen



electric vehicle battery and infrastructure optimisation.

The current Science, Technology and Innovation Strategy 2021-2027, and the state

(national) and regional scientific and technical research and innovation plans establish the

RD&D and innovation activities to be developed. The national and regional plans are in

turn aligned with the EU agenda defined in collaboration with member states, especially

the Strategic Energy Technology Plan (SET-Plan). The objectives outlined in the

documents align with those set by the European Union under the framework programmes

for the financing of the R&D and innovation activities “Horizon 2020” (2014-20) and

“Horizon Europe” (2021-27).

The National RD&D Strategy recognises a degree of thematic and regional fragmentation

of RD&D programmes and priority setting. To address this, Spain has stated a goal of

aligning RD&D across “strategic lines”, i.e. adopting a more mission-oriented approach to

four areas. In some cases, the policies might operate at different levels, such as local,

national or municipal levels.



Resource push: A sustained flow of R&D funding, a skilled workforce (e.g. researchers

and engineers) and research infrastructure (laboratories, research institutes and

universities) are required. These resources can come from private, public or even

charitable sources, and can be directed to specific problems or basic research.



Knowledge management: Knowledge should flow smoothly between researchers,

academia, companies, policy makers and international partners, among others.



Market pull: The expected market value of new products or services must be big

enough to make the R&D risks worthwhile, and this is often a function of market rules

and incentives established by legislation. If the market incentives are high, then much

of the risk of developing a new idea can be borne by the private sector.



Socio-political support: There needs to be broad socio-political support for new

products or services, despite potential opposition from those whose interests might be

threatened.

6. ENERGY RESERACH, DEVELOPMENT AND INNOVATION

its innovation programmes, including through national science and innovation missions, in

“micro-missions” to address knowledge gaps, and through large-scale demonstrations in

selected thematic areas.

The LTS, published in November 2020, also outlines how energy innovation priority setting

needs to evolve to suit the broader energy sector transformation, towards processes able

to “identify priority research tracks and articulate them around missions.” The innovation

ecosystem needs to evolve at the European and Spanish national levels, “towards one

adapted to the uncertainties of an environmental and energy transition of the proposed

magnitude”, and better “oriented towards intelligent management” of associated risks.

Renewable energy has been a long-standing priority of Spanish RD&D activity, accounting

for around half of all energy RD&D spending since 2004 and for 63% in 2018. The NECP

affords priority to energy generation from renewable sources in which there is already a

competitive or leadership position, and where Spanish companies actively participate in

the market. However, the National RD&D Strategy identifies the need to evolve renewable

generation into new areas and applications, and places a strong focus on green hydrogen,

energy storage, and renewable energy innovation in mobility and industry.

The National RD&D Strategy and NECP place a strong focus on general purpose

technologies and technology areas that cut across the economy like the Internet of Things,

artificial intelligence, blockchain, ICT technologies, and biotechnology and

nanotechnology. Special emphasis is placed on the need to accelerate innovation in

technologies and solutions that increase flexibility and facilitate the management of a

system that aims “towards 100% renewables” by 2050.

In this sense, it highlights the inspiration that the Hydrogen Roadmap, published in October

2020, has taken in its own priority setting from the European Commission’s Hydrogen

Strategy, and notes the strategic importance for Spain of hydrogen value chains being

included as Important Projects of Common European Interest. Hydrogen presently

accounts for 4% of energy R&D expenditure (EUR 5 million in 2018), down from a peak of

7% in 2010 (EUR 12 million).

A number of priority areas have also been established in accordance with the country’s

relative advantages in “natural resources, industry and Spanish geography”:

improvements to facilitate deployments of heat and cold generation systems; increasing

the share of renewables in urban heating networks and refrigeration, in buildings and in

communities; active and passive solutions in the energy rehabilitation of buildings; and in

industry, a focus on process efficiency and waste heat recovery and on the development

of industrial renewables and CO

capture technologies.

Other power and storage technologies accounted for 17% of energy R&D expenditure

in 2018, and total spending in the area has nearly quadrupled in the last ten years.

Electrical storage systems and their optimisation are highlighted in the NECP, including

the interface of vehicle and stationary batteries, an area where the plan underlines the

importance of Spanish industry and academia. System approaches to R&D prioritisation

in electricity are also highlighted in the plan, including smart grids, increased flexibility from

electricity assets and renewable integration.

Nuclear R&D has been scaled down from a third of overall R&D spending in the 2000s to

under 1%. Given the orderly phase-out of nuclear envisaged, the NECP notes the

6. ENERGY RESEARCH, DEVELOPMENT AND INNOVATION

ENERGY SYSTEM TRANSFORMATION

importance of refocusing nuclear R&D towards securing long-term operation, and

managing irradiated fuel and waste.

Digitalisation is also at the forefront of a number of prioritisation documents. The LTS

includes a mention of both the impacts digitalisation is likely to have on the innovation

strategy and some recommendations for accelerating digital innovation in energy. It

highlights the IEA’s own recommendations of establishing a level regulatory playing field

for new digital technologies; guaranteeing broad access to data and data privacy; and the

promotion of joint public-private initiatives in the areas of smart grids, demand response

and the identification of new business models. Concrete actions on further digitalising

energy systems remain to be clarified, however. The National AI RD&D Strategy,

published in November 2020, does not delineate specific actions, milestones or objectives

for artificial intelligence innovation in energy beyond outlining opportunities.

Spain also envisages the development of a National Industrial Plan, where the energy

transition would take a central role. The plan intends to maximise the economic

development and job creation potential from the energy transition.

Key actors in Spain’s energy innovation ecosystem

Spain has a long-standing energy innovation system, that is currently undergoing a

process of transformation and enhancement to support energy sector and other related

policy objectives. The Ministry of Science and Innovation is the main delegated body for

implementing government RD&D strategy, in co-ordination with the Ministry for the

Ecological Transition and the Demographic Challenge and other agents.

These agents include the State Research Agency, created in 2015, which oversees the

financing, tracking and evaluation in science and engineering. Among the State Research

Agency’s activities, the technology platforms are of particular relevance to energy. These

are public-private frameworks that cut across the full innovation ecosystem, concentrate

innovation efforts, and aid in priority identification and setting. Technology platforms with

a direct impact on energy innovation include solar photovoltaics (FOTOPLAT), wind

(REOLTEC), nuclear fission (CEIDEN), concentrated solar (Solar Concentra), mobility

(Move to Future), rail (PTFE), geothermal (GEOPLAT), biomass (BIOPLAT), smart cities

(SmartLiving), storage (BATTERYPLAT), hydrogen and fuel cells, and energy efficiency.

Programme implementation is facilitated by public research organisations like the Spanish

National Research Council or the Centre for Energy, Environment and Technology

Research (CIEMAT). Their activities are complemented by 26 technology centres and

support centres for technology innovation related to energy and climate. Spanish

implementation organisations, chiefly CIEMAT, are heavily involved in European R&D

policy making, including through participation in all of the 14 temporary working groups

constituted as part of the SET-Plan’s priority-setting exercises, and intended to elaborate

implementation plans for each thematic area. CIEMAT also led the Concentrated Solar

Temporary Working Group.

The Centre for Industrial Technological Development (CDTI) institute helps connect basic

RD&D efforts with market deployment, with the explicit aim of increasing the

competitiveness of private sector enterprises. The CDTI fulfils its remit through a range of

programmes that includes the new Cervera efforts for Spanish small and medium-sized

6. ENERGY RESERACH, DEVELOPMENT AND INNOVATION

100

enterprises and technology and innovation centres. Finally, ALINNE (Alliance for Energy

Research and Innovation), founded by the government in 2011, helps pool stakeholders

and co-ordinate efforts between all the agents of the energy RD&D value chain.

Resource push

Spain ranks 33rd in the world in RD&D expenditure as a share of GDP at 1.24%, under

the EU-28 average of 1.98% and the OECD average of 2.34%. In September 2020, the

National RD&D Strategy set the aim of bringing this share to 2.12% by 2027. The NECP

sets the long-term objective of reaching overall spending in innovation above 2.5% of GDP,

and maintaining these levels regardless of economic cycles. The specific contribution of

energy RD&D has been under evaluation since the publication of the NECP, intended to

reflect the weight of energy in overall EU innovation ambitions. This new framework

represents a key opportunity to expand RD&D research in energy, and to direct funds to

strategic priority innovation areas that are key to Spain’s energy policy objectives.

Spain’s central approach to financial support for energy R&D is based on a range of public

funding mechanisms, which include two flagship programmes, “Retos de Investigación”

and “Retos de Colaboración”. Together these accounted for EUR 154 million, almost 40%

of RD&D expenditure during the period. These are largely “bottom-up” programmes in

which project proposals from institutes and companies are evaluated against common

criteria.

The recently approved economy-wide RD&D Strategy includes several considerations

related to the establishment of a mission-oriented approach to RD&D, including the

development of so-called “tractor” flagship demonstration projects in thematic areas key

to the energy transition and the establishment of success indicators. Such an approach

could potentially support strategic clean energy technologies and provide resources for

co-ordination and long-term planning. However, the extent to which energy technologies

will feature in the state and regional plans remains undecided.

Public spending on energy R&D

In 2018, the Spanish government spent EUR 103.2 million on energy-related RD&D, a

32% increase from the previous year. Despite the increase, Spain spends the fourth-lowest

share of GDP of all IEA member countries on energy-related RD&D (0.0085%). Reported

RD&D budgets have also fluctuated considerably. Public expenditure reached a high

in 2011 at EUR 323 million, and has since declined and remained around EUR 100 million

since 2014.

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101

ENERGY SYSTEM TRANSFORMATION

Figure 6.2 Energy-related public RD&D spending per GDP in IEA countries, 2018

Among IEA countries, Spain ranked the fourth-lowest on energy-related public RD&D

spending per thousand units of GDP.

Note: Missing data for the Czech Republic, Greece and Luxembourg.

Source: IEA (2020b), Energy Technology RD&D 2020, www.iea.org/statistics

Among the key thematic areas, renewables received the largest share of expenditure,

accounting for 63% of the total, half of which was allocated to wind energy. The remaining

funding for renewables went to solar (26%), ocean energy (8%) and biofuels (6%). Other

electricity and storage technologies received 17%. However, these were mostly directed

at electricity transmission and distribution (12% of the total), with energy storage receiving

just over 3%. Energy efficiency received 12%, mainly directed towards projects in the

industry sector.

Figure 6.3 Energy-related public RD&D spending in Spain by category, 2000-18

Energy-related RD&D was EUR 103 million in 2018, most of which went to renewables.

Source: IEA (2020b), Energy Technology RD&D 2020, www.iea.org/statistics.

Spain’s innovation system experienced one of the largest reductions in government

funding for R&D among OECD countries over the period 2008-15, with a decline of nearly

0.0

0.2

0.4

0.6

0.8

1.0

Energy RDD spending per

thousand units of GDP

IEA .

100

150

200

250

300

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

EUR million (2019 prices)

Nuclear

Cross-cutting technologies

Hydrogen and fuel cells

Fossil fuels

Energy efficiency

Other electricity and storage

technologies

Renewables

6. ENERGY RESERACH, DEVELOPMENT AND INNOVATION

102

30% in real terms (OECD, 2017). The OECD notes low levels of execution of some parts

of the public R&D budgets due to limited demand from private firms and complex

management procedures.

Figure 6.4 Spain’s gross domestic expenditure on total R&D, 2000-18

Source: OECD (2020), Gross Domestic Expenditure on R&D, https://data.oecd.org/rd/gross-domestic-spending-on-r-

d.htm.

Private spending on energy R&D

In 2017, private spending on “Energy Union” R&D in Spain stood at 0.01% of GDP, slightly

below the average value for the European countries with available data of 0.026%. The

share of spending has remained relatively constant since 2010, declining by 0.01% (EC,

2020b).

In 2015, Spain issued 3.35 patents per million inhabitants toward Energy Union priorities,

ranking 15th out of 27 EU member states. The EU estimates that Spain’s private R&D

efforts added 19.5% of value added in terms of real energy costs to the country in 2015,

increasing by 31% since 2005 (EC, 2020b).

Education and skills

Public spending in higher education in Spain is about 20% below the OECD average, most

of this coming from regional governments, which are both the main initial source and the

main final spender of education funds in Spain. Spain has 30 officially recognised master’s

degree programmes related to energy. Master’s or equivalent degrees account for the

largest share of adults with a tertiary education, reflecting a stronger tradition of long first

degree programmes that lead directly to a master’s qualification. However, the country is

below the average of students benefiting from grants, loans or other financial assistance

at 43%.

Of particular relevance for the energy economy, Spain ranks 28th among OECD countries

in the share of upper secondary graduates in the fields of engineering and manufacturing,

with only 12% of those being women. While Spain ranks 2nd in the OECD in patenting

activity by women inventors across all fields, and has a share of women researchers above

the European average, their presence is concentrated in other economic sectors led by

0.2

0.4

0.6

0.8

1.2

1.4

1.6

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Share of GDP

Total R&D

per unit

GDP

Energy

R&D per

unit GDP

6. ENERGY RESEARCH, DEVELOPMENT AND INNOVATION

103

ENERGY SYSTEM TRANSFORMATION

health and welfare. While Spain ranks 18th in the OECD in the share of doctorate holders

in the general population (OECD, 2019), it currently has the second-highest rate of entry

into doctoral programmes and ranks above the OECD average in higher education.

However, this may reflect other underlying socio-economic trends: the share of employed

young adults not in education is 21 percentage points lower than in 2008, while the share

of the same age group in education is about 18 percentage points higher. The National

R&D Strategy also highlights a lack of internationalisation of doctoral programmes.

Analysis by the Spanish government has shown that achieving strategic energy transition

objectives will require the creation of between 235 000 to 348 000 new jobs. The NECP

establishes a measure to identify academic and professional knowledge formation gaps to

reach these objectives, to be implemented through the Ministry of Education, the Ministry

of Universities, the Ministry of Science and Innovation, and the Ministry for the Ecological

Transition and the Demographic Challenge, in collaboration with the IDAE, other

institutions and the autonomous communities.

Knowledge management

The NECP orients the knowledge dimension of the energy innovation system according to

three guiding principles: 1) co-ordination, i.e. sectoral and regional priorities for RD&D

have to be co-ordinated and aligned to maximise policy impact; 2) co-responsibility,

implying that knowledge has to be absorbed by national and local government entities, the

private sector, and civil society as a whole; and 3) interdisciplinarity, which underscores

the cross-cutting nature of the energy transition challenge and the need to generate

knowledge across different scientific and technical thematic areas.

In the area of international knowledge exchange, Spain currently participates in 19 (out of

a total of 38) IEA technology collaboration programmes. One of them relates to end use in

buildings while two are related to end use in electricity and four to end use in transport.

Spain also participates in two fossil fuel-related programmes, six renewable energy and

hydrogen technology collaboration programmes, and one cross-cutting programme. Spain

is also a long-standing member of the Clean Energy Ministerial since its establishment and

has led the work on renewable energy as well as participated in work on smart grids and

flexible power systems. Spain is not a member of Mission Innovation, although, according

to the NECP, it intends to join.

Spanish institutions are a particularly active partner under the SET-Plan and Horizon 2020

activities, particularly in the areas of solar photovoltaic and solar thermal electricity, and in

energy efficiency. CIEMAT is the national representative in a number of European

initiatives and takes an important role in co-ordinating international energy innovation

activities. It is the national representative in the European Energy Research Alliance, one

of the central SET-Plan instruments for increasing European clean energy innovation

capacities. The new RD&D Strategy contemplates expanding existing instruments like the

European Commission’s “Intelligent Specialisation” framework, aimed at identifying priority

areas of specialisation that could receive EU Cohesion Funds. The S3-Energy “Intelligent

Specialisation” platform includes existing co-ordination functions on bioenergy, marine

energy, smart grids, solar energy and sustainable buildings.

Finally, the Spanish innovation system has important links with Latin American countries,

particularly in the areas of renewables, microgrids and energy storage. The Iberoamerican

6. ENERGY RESERACH, DEVELOPMENT AND INNOVATION

104

Programme for Science and Technology for Development and the EU-Latin American and

Caribbean States common interest group both develop jointly financed programmes.

CIEMAT also has knowledge exchange links with UNIDO focusing on knowledge transfer

for island energy solutions.

Market pull

Spain has a long-standing track record of incentivising clean energy deployment through

market pull instruments, including support for variable renewables, buildings efficiency

programmes, targeted support for low-carbon fuels or flagship low-carbon technology

demonstrations. Framework market conditions have helped position several Spanish

utilities and energy equipment manufacturers in key sectors as European and global

leaders, which in turn has increased the level of corporate R&D in these sectors and

enhanced the incentives for innovators. These companies include Iberdrola, Gamesa (now

Siemens Gamesa), Abengoa, Acciona and Power Electronics.

The CDTI institute helps connect basic RD&D efforts with the innovation stages closer to

commercialisation through a range of programmes that includes the new Cervera efforts

for Spanish small and medium-sized enterprises and technology and innovation centres.

In 2017, the CDTI approved 84 projects, amounting to investments of EUR 109 million and

a further EUR 76 million in public commitments. Renewable energies and emerging

technologies accounted for 68% of these investments. Demonstration efforts in key

technology areas are carried out through initiatives like the “Plan de desarrollo de

proyectos singulares”, where the national energy efficiency institute, IDAE, can participate

in flagship demonstrations. These efforts are currently being furthered to create “tractor”

flagship demonstration projects, as part of Spain’s recent drive towards a more mission-

oriented approach to innovation.

The National RD&D Strategy, however, calls attention to a number of weaknesses in

connecting the innovation push to the market; chief among these are: the relatively “low

innovation capacity of Spanish companies and institutions”, despite a critical mass of

innovators; relatively low levels of public-private collaboration both in terms of co-financing

and implementation; low levels of knowledge transfer between industry and society at

large, and protection of inventions; and a need to increase new technology capacities in

Spanish companies, including related to digitalisation.

The latest OECD Economic Survey (OECD, 2018a) outlines several barriers to co-

ordination that remain in the latter stages of the innovation process, a number of them

echoed in the NECP and the National R&D Strategy. Despite progress made in simplifying

and streamlining start-up requirements, the OECD Economic Survey notes that Spanish

entrepreneurs still have to undergo a large number of different procedures, notably when

they wish to activate a public limited company. Moreover, opening up and running a retail

business is still difficult, with relatively restrictive licensing requirements. OECD

entrepreneurship rates reveal potential entrepreneurs (those expecting to start a new

venture in the next three years) are relatively scarce in Spain compared to the EU average

(6.9% vs. 12.6%).

The OECD notes that further openness is required in access to the “liberal professions”,

many of which are central to energy sector operations. A large number of exclusive rights

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ENERGY SYSTEM TRANSFORMATION

continue to be granted to professionals in areas such as accounting, the built environment,

engineering and legal services. These barriers serve to increase the rigidity and

inefficiency of the market for professional services in energy, imposing extra costs on firms

and consumers – particularly onerous at a time of increased pressure to reduce costs.

The NECP acknowledges the need to address these barriers, and proposes two main work

areas: 1) increasing the flexibility of hiring practices, including adapting them to the

duration of innovation initiatives; and 2) streamlining the financial management of projects

and initiatives through internal accounting.

“Market pull” needs to also drive new, key technology areas outlined in the strategy where

current efforts appear insufficient. A recent OECD report on private equity investment in

Spain (OECD, 2018b, highlights how only 3% of all capital invested in start-ups in Spain

between 2011 and 2018 focused on digital and artificial intelligence technologies, far

behind France (13%), Germany (14%) and the United Kingdom (55%).

The recently published National AI RD&D Strategy notes that current start-up activity in

this space is lacking, while also listing co-ordination barriers preventing a better match of

investment capital to small and medium-sized enterprises. A 2019 study by the McKinsey

Global Institute that ranked European countries according to their market readiness to

adopt new digital and artificial intelligence technologies ranked Spain in

11th position. The

Spanish National AI Strategy notes an expected mismatch between current market

readiness and the demand for these technologies, highlighting an expected 66% increase

in demand for digital technology capacities by 2030.

Finally, the NECP also recognises the need for new approaches towards innovation in

stages closer to the market. The central regulatory body, the National Commission of

Markets and Competition, has put forward an overarching electricity market design

regulation that includes a provision to support demonstrations. The NECP recognises in

this measure the possibility of creating regulatory sandboxes in electricity, which other

countries in Europe have been actively pursuing. These platforms are effective and

desirable, as they fulfil many of the objectives of national R&D and climate strategies: they

promote strong co-ordination across public and private stakeholders, and between local,

regional and national levels of government; they signal opportunities for focusing industrial

value creation efforts, particularly in areas the government has identified as central for the

transition, including variable renewables deployment, system integration or demand-side

electrification; and they attract innovation talent within the ecosystem created for testing

and demonstration.

Socio-political support

Institutional governance

Spain features a relatively high degree of decentralisation of innovation activity, and the

need to enhance national-regional co-ordination, as well as co-ordination across regions,

is well articulated in the NECP and other strategic documents. Regions have an outsized

institutional role in higher education relative to other OECD and EU countries, constituting

the majority of education spending. The National RD&D Strategy underlines the important

differences in RD&D spending intensity, and the high level of regional fragmentation of

6. ENERGY RESERACH, DEVELOPMENT AND INNOVATION

106

RD&D programmes with over 70 public funding entities present in the autonomous

communities, a number that has grown by 23% since 2017.

Efforts are underway to improve national-regional co-ordination. The process of

elaborating the National RD&D Strategy included a National Science, Innovation and

Technology Policy Council, whose Executive Commission was formed by regional

government stakeholders and contributed to collecting and co-ordinating regional RD&D

needs. The council will also have a designated role in co-ordinating regional inputs from

the autonomous communities into the European S3 “Smart Specialisation programmes”,

a pre-condition for receiving EU Cohesion Funds for innovation.

A SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis carried out to inform

the National RD&D Strategy revealed that while public perception of science and

innovation in Spain is high, a widespread opinion that Spain lacks a strong culture of

innovation remains. It also identified rising interest in energy technologies and the

transition as a key opportunity to improve social awareness and support for innovation.

The NECP proposes a number of measures to address this gap, including public

awareness and training campaigns or improving access to energy sector information and

data.

Given the wide-ranging transformational ambitions in its energy RD&D strategy, the

government of Spain is accelerating social innovation to secure further socio-political

support – an area that the previous IEA review of Spanish energy policies had signalled

for improvement. Within its NECP and RD&D strategies, Spain plans to support the

development of social and urban innovation projects; increasing awareness and

dissemination; and encouraging attitudes and behaviour that promote sustainability,

efficiency and emissions reductions. Among these the government envisages more

participative R&D programmes, gamification and design thinking, crowdfunding and

creating an association that aggregates researchers, entrepreneurs and energy sector

stakeholders to promote social innovation.

Finally, the NECP and the National RD&D Strategy articulate a shift towards a more

programmatic and mission-oriented approach to innovation, including through the

establishment of concrete research “lines” that encompass various programmes across

institutions, flagship demonstration projects or “micro-missions” to tackle concrete techno-

economic constraints. While the approach is commendable, institutional governance

needs to be adapted to be able to execute such an approach efficiently. Identifying priority

areas for demonstrations and technical constraints requires a system perspective and a

top-down, inter-ministerial approach to priority setting – a departure from the current,

bottom-up approach of rewarding excellence through pre-established programmes.

Monitoring, evaluation and tracking of results

The current bottom-up approach to rewarding excellence could significantly benefit from

being coupled with efforts to improve co-ordination and alignment with energy and other

national policy priorities. The 2015 IEA review of Spanish energy policies stressed the

need to strengthen monitoring, evaluation and tracking systems. While efforts have not

advanced significantly, a number of efforts are being strengthened or are in the planning

stages.

The NECP envisages a measure for strengthening a tracking mechanism for all public aid

granted under the state plans for scientific and technical research and innovation. The

6. ENERGY RESEARCH, DEVELOPMENT AND INNOVATION

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ENERGY SYSTEM TRANSFORMATION

state plans are intended to include the monitoring indicators for these actions, including

key performance indicators for the degree of achievement of the objectives defined for

each action across different execution time frames.

Assessment

Spain’s recently articulated National RD&D Strategy, the NECP and LTS together form a

robust framework to accelerate Spain’s energy innovation capabilities and fulfil its energy

transition ambitions, as well as those in other transversal policy areas, including its digital

and industrial strategies or its territorial balancing efforts. As plans and programmes further

unfold, a clear, coherent government-wide priority setting that is well communicated to

stakeholders will be critical, one that is consistent across different strategic and

programmatic documents from the different ministries involved in the energy transition.

Aligning research priorities with new clean energy transition challenges is essential to

ensure that the various measures and programmes are effective. Moreover, tracking and

evaluation mechanisms that are able to feed back into policy and programme directions

should be at the core of every programmatic effort to ensure consistency and effectiveness

of RD&D efforts.

Spain’s public expenditure on overall RD&D as a share of its economic output, and on

energy RD&D in particular, both rank well below the EU and OECD averages, placing

Spain 33rd in the world in overall RD&D intensity and 4th lowest in the IEA in energy RD&D

intensity. The new overall innovation strategy aims to bring RD&D as a share of GDP to

2.12% by 2027, which while ambitious and commendable, would still fall short of the OECD

average. Given the central role the Spanish government affords the clean energy transition

and its strong links with and potential spill-overs into other flagship policy areas aimed at

revitalising territories and boosting industrial capacities, it would seem consistent that

RD&D expenditures exceed the OECD average.

The previous IEA review of Spain’s energy policies in 2015 recommended the

establishment of an energy RD&D strategy and agenda to aid in the prioritisation and

co-ordination of programmes. Since then, ALINNE has further developed its analysis of

priority technologies and started a new prioritisation exercise; however, its role is mainly

an informative one. The NECP “recognises and acknowledges” the role of ALINNE,

however it falls short of laying out more explicit functions and responsibilities for

priority setting.

The Cervera programme has been developed in part to target specific priority

technologies. Most policies and programmes, however, are not directed towards

pre-identified priority areas for the Spanish economy. In the “Retos de Investigación y

Colaboración” programmes, for instance, wind and solar dominate, reflecting the Spanish

industry and market, but future innovation needs, for which there is no market today, have

less weight (e.g. storage or hydrogen, both of which account for around 3% of funds).

Spain should be commended for aiming to restructure its innovation activities around

high-level programmatic research directions, with a mission-oriented approach.

Mission-oriented research is proving to be a strong tool in several countries to align actors

across research, academia and the private sector, promoting the effective transfer,

co-operation and sharing of knowledge, and developing and strengthening supply chains

6. ENERGY RESERACH, DEVELOPMENT AND INNOVATION

108

creating opportunities for industrial development, and boosting entrepreneurship. The

national RD&D Innovation Strategy stresses the need of missions to address all stages of

the value chain, from bench to market scale.

The current bottom-up approach to rewarding excellence should be coupled with

wider-reaching efforts to improve co-ordination and alignment with energy and other

national policy priorities. The Hydrogen Roadmap is an excellent example of a broad

technology area at an early stage in which several technology areas could be selected for

future RD&D to match local strengths and future market potential, both internal and

export-oriented. The government of Spain could consider evolving ALINNE’s role into a

more formal or programmatic one. Flagship demonstrations should also be pursued and

targeted towards areas the government has identified as of strategic importance to energy

(storage, hydrogen, circular economy, digitalisation, etc.).

Spain’s objectives in RD&D, particularly those in cross-cutting areas like hydrogen, grid

integration or storage where other countries are very actively developing capabilities,

would benefit from a continued effort in enhancing international collaboration. Spain

already actively participates in European innovation initiatives; however, its participation

would benefit from increasing awareness within the energy industry and better

communicating Spain’s roles and achievements within EU framework programmes,

including through enhancing ministerial websites. Where EU and Spanish interests

overlap, participation in the EU Innovation Fund is a notable opportunity to secure

co-funding.

Spain is not a member of Mission Innovation, but has stated its goal of joining it in the

NECP. The thematic areas of the recently relaunched Mission Innovation programmes

(which include renewables, storage and smart grids, and alternative fuels) are well aligned

with national RD&D priorities and Spain’s participation would be beneficial to its RD&D

objectives. Finally, Spain’s industrial strategy and stated NECP objectives to expand the

reach of Spanish companies in novel clean technology areas could be catalysed by

strengthening its innovation co-operation activity with Latin American countries. There is

currently a strong presence in the region of Spanish electric utilities and energy

multinationals, and beyond enhancing it, facilitating the participation of start-ups and small

business in developing, demonstrating and deploying new and low-carbon technologies

could yield compound benefits to innovation.

Recommendations

The government of Spain should:

 Adopt an objective-oriented approach to clean energy innovation policy, with

aspirational targets for the outputs and outcomes in line with other areas of energy

policy making, and monitoring and evaluation instruments using key performance

indicators.

 Further develop the strategic prioritisation of technology areas in which Spain could

pursue its comparative advantage and contribute to the NECP’s goals

(e.g. renewables integration or hydrogen).

6. ENERGY RESEARCH, DEVELOPMENT AND INNOVATION

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ENERGY SYSTEM TRANSFORMATION

 Engage with other governments in Europe and beyond to share and adopt best

practices for governance structures that can ensure smooth flows of information

between research funding bodies, technology platforms and different ministries.

 Seek to increase the energy component of the new Spanish Science, Technology and

Innovation Strategy 2021-2027 spending at least in line with the overall objective to

double public and private innovation spending per unit of GDP.

 Seek to adopt a survey method or other technique to track private sector energy R&D

spending that is currently unavailable to government.

References

EC (European Commission) (2020a), Integrated National Energy and Climate Plan

2021-2030, https://ec.europa.eu/energy/sites/ener/files/documents/es_final_necp_main_en.

pdf.

EC (2020b), Energy Union Indicators, https://ec.europa.eu/energy/data-analysis/energy-

union-

indicators/scoreboard_en?dimension=Research%2C+innovation+and+competitiveness.

IEA (International Energy Agency) (2020a), Tracking Clean Energy Innovation,

www.iea.org/reports/tracking-clean-energy-innovation.

IEA (2020b), Energy Technology RD&D 2020, www.iea.org/statistics.

IEA (2019), Energy Technology Innovation Partnerships, www.iea.org/reports/energy-

technology-innovation-partnerships.

OECD (2020), Gross Domestic Spending on R&D(indicator) ,

https://data.oecd.org/rd/gross-domestic-spending-on-r-d.htm.

OECD (2019), "Research", in Benchmarking Higher Education System Performance,

https://doi.org/10.1787/177f0323-en.

OECD (2018a), OECD Economic Surveys: Spain 2018, https://doi.org/10.1787/79e92d88-

en.

OECD (2018b), “Private Equity Investment in Artificial Intelligence”, OECD Going Digital

Policy Note, www.oecd.org/going-digital/ai/private-equity-investment-in-artificial-

intelligence.pdf.

OECD (2017), OECD Science, Technology and Industry Scoreboard 2017: The digital

transformation, http://dx.doi.org/10.1787/9789264268821-en.

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ENERGY SECURITY

7. Electricity

Key data

(201

Electricity generation

: 271.0 TWh (natural gas 30.9%, nuclear 21.5%, wind 20.5%,

hydro 9.1%, solar 5.6%, coal 5.2%, oil 4.8%, bioenergy and waste 2.4%)

-7.1% since

2009

Electricity net

import: 6.9 TWh (imports 18.7 TWh, exports 11.9 TWh)

Electricity consumption:

242.2 TWh (services/other 33.7%, industry 31.4%,

residential

30.1%, energy sector 3.2%, transport 1.6%)

Overview

Electricity accounted for 24% of total final consumption (TFC) in Spain in 2019, the

second-largest energy source after oil. Demand for electricity is increasing across all

sectors, particularly in the buildings sector. In the last decade, electricity generation in

Spain has seen notable decarbonisation, as the share of electricity generation from fossil

fuels decreased from 56% in 2009 to 41% in 2019, while electricity generation from

renewable energy sources (including non-renewable waste) increased from 24% in 2009

to 38% in 2019. The phase-out of coal has already started, with the amount of electricity

from coal more than halving in one year between 2018 and 2019, mainly compensated by

natural gas.

Looking ahead, the government is planning a sizeable integration of renewables, mainly

wind and solar, in the electricity mix, with the target of a 74% share of renewables in 2030.

In addition to a complete coal phase-out, the country is planning to start phasing out

nuclear power in 2027. The forthcoming changes in the electricity mix will require an

increased focus on system flexibility. To this end, the government is planning to increase

interconnection capacity, mainly with France, in the coming years. Currently, the levels of

electricity interconnection are still below the 10% required by the EU for 2020. Increased

international interconnectivity will also need to be accompanied by upgraded national

grids.

In recent years, Spain’s policy for the electricity sector has emphasised the importance of

affordability and addressing energy poverty. Notably, since 2018, the Spanish government

has stepped up measures to ensure energy access to vulnerable customers, which

became instrumental to assist households to manage the economic fallout from the

COVID-19 pandemic.

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112

Electricity supply and demand

Electricity generation

Total electricity generation in Spain was 271.0 terawatt hours (TWh) in 2019, and has

gradually decreased since its peak in 2008 of 311.0 TWh (Figure 7.1). Spain has a nuclear

fleet providing a constant base load of about 60 TWh/year since 1990, corresponding to

22% of total electricity generation in 2019. Fuel oil and diesel electricity generators are

used mainly in the islands, and together accounted for 5% of total generation in Spain

in 2019. Electricity generation from coal has decreased, especially in recent years,

representing the start of a coal phase-out. In 2019, coal represented only 5% of total

electricity generation, a significant decrease from 14% in the previous year.

Natural gas plays a major role in the country’s electricity mix, accounting for almost

one-third of electricity generation in 2019. The flexibility of natural gas power plants is used

to balance the coal phase-out and variability of electricity generation from renewable

energy sources such as wind and solar, but also the fluctuating annual generation from

hydro power plants.

Renewables have become an increasingly important source of electricity generation in the

country, amounting to 38% in 2019, including wind, hydro, solar, and bioenergy and waste.

Within renewables, wind (20.5%) and hydro power (9.1%) had the largest shares in 2019,

while solar power (both photovoltaic and concentrated solar power) experienced a quick

rise between 2008 and 2014, to later stabilise at around 5.6%. Bioenergy sources

consisted mainly of solid biomass, with some shares of renewable waste and biogas, and

accounted for 2.4% of total generation in 2019.

In terms of installed capacity, in 2019, Spain relied on 25 gigawatts (GW) of gas-fired

power plants, 26 GW of wind capacity, 13 GW of hydro (excluding pumping), 7.9 GW of

coal-fired plants, 7.1 GW of nuclear and 8.9 GW of photovoltaic panels connected to the

grid, in addition to 2.3 GW of concentrated solar power. Spain also has a small installed

capacity of electricity generation using tidal energy, amounting to 4.8 megawatts (MW)

in 2019. Relative to peak demand, Spain currently has an overcapacity of generation in its

electricity system, even in a context of recent coal plant closures.

Thanks to growth in both wind and solar generation since 2000, in an IEA comparison,

Spain falls slightly below the average in terms of the share of fossil fuels in its electricity

mix, while it ranked 13th highest in terms of the share of renewables in 2019 (Figure 7.2).

7. ELECTRICITY

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ENERGY SECURITY

Figure 7.1 Spain’s electricity supply by source, 2000-19

Spain’s electricity supply comes mainly from natural gas and nuclear, as well as hydro and

wind.

Notes: TWh = terawatt hour. Bioenergy and waste includes non-renewable waste. Considering the marginal

difference between waste from renewables exclusively and waste including non-renewable sources, the present

review incorporates non-renewable waste.

Source: IEA (2021a), IEA World Energy Statistics and Balances (database), www.iea.org/statistics

Figure 7.2 Electricity generation by source in IEA member countries, 2019

Spain’s share of renewables in electricity generation is slightly below the IEA average.

Source: IEA (2021a), IEA World Energy Statistics and Balances (database), www.iea.org/statistics.

100

150

200

250

300

350

TWh

Solar

Wind

Hydro

Bioenergy and waste

Nuclear

Oil

Natural gas

Coal

0% 20% 40% 60% 80% 100%

Switzerland

Sweden

Norway

France

Luxembourg

Finland

New Zealand

Denmark

Canada

Slovak Republic

Austria

Belgium

Hungary

Spain

United Kingdom

Portugal

Germany

Czech Republic

Turkey

Italy

Ireland

United States

Greece

Korea

Japan

Estonia

Netherlands

Mexico

Australia

Poland

Oil Natural gas Coal Peat Nuclear Bioenergy and waste Hydro Wind Solar Geothermal

Spain

7. ELECTRICITY

114

Electricity demand

Industry, residential and services are the main electricity-consuming sectors in Spain,

accounting for about one-third each (Figure 7.3). In 2019, most electricity (82 TWh) was

used in the services/other sector, which includes commercial and public services, as well

as agriculture, forestry and fishing. The share of electricity in energy demand in these

sectors increased significantly from 2000 to 2009, but fell again in the following years. For

example, the share of electricity in the energy demand of commercial and public services

decreased from 74% in 2009 to 53% in 2019.

The residential sector consumed 73 TWh of electricity in 2019. The share of electricity in

the sector’s energy demand has increased in recent years, from 39% in 2009 to 43%

in 2019, reflecting an increase in electricity demand from residential appliances. In

contrast, in the industry sector, the share of electricity in energy demand fell from 31%

in 2009 to 26% in 2019. Electricity demand from industry was 76 TWh in 2019.

The use of electricity in the transport sector is still low, at 4 TWh in 2019. Despite recent

efforts to increase the electrification of road transport, most of the electricity consumption

in the transport sector comes from rail.

Figure 7.3 Electricity consumption in Spain by consuming sector, 2000-19

Electricity consumption in Spain is largely concentrated in the residential, services and

industry sectors.

* Energy includes petroleum refineries and coal mines.

** Services/other includes commercial and public services, and agriculture and forestry.

Note: TWh = terawatt hour.

Source: IEA (2021a), IEA World Energy Statistics and Balances (database), www.iea.org/statistics

Electricity market structure

The Spanish wholesale market is part of the common European market through the Iberian

power market (Mercado Ibérico de Electricidad, MIBEL), created in 2007. OMIE, the

nominated electricity market operator (or exchange) in Spain, manages the spot market

(day-ahead and intraday markets) while OMIP in Portugal manages the futures market.

Both are part of the Operador del Mercado Ibérico (OMI, Iberian Market Operator)

business group which is 50/50 owned by the Spanish (OMEL) and Portuguese (OMIP

SGPS) wholesale market operators from pre-MIBEL times.

100

150

200

250

300

TWh

Energy*

Industry

Transport

Services/other**

Residential

7. ELECTRICITY

115

ENERGY SECURITY

The two system operators, Red Eléctrica de España (REE) in Spain and Redes

Energéticas Nacionais (REN) in Portugal, are responsible for technical management,

including system security and ancillary services. MIBEL has two bidding zones, and when

interconnections are congested, the markets on the Spanish and Portuguese sides see

different prices. The wholesale market is competitive.

Law 24/2013 established REE as the manager of the transmission grid and granted it the

function of sole transmission operator. REE was certified in 2012 by the National

Commission of Markets and Competition (CNMC) as an ownership unbundled

transmission system operator (TSO), and currently oversees more than 44 000 km of

transmission lines. As manager of the transmission network, REE is responsible for

developing and enlarging the grid, carrying out its maintenance, co-ordinating the physical

flow of electricity between external systems and the Iberian peninsula, and guaranteeing

third-party access to the transmission grid under equal conditions. The transmission grid

is planned over six-year periods and approved by the government with a spending limit

tied to gross domestic product (GDP). Spain will also be included in the European Ten-

Year Network Development Plan, which feeds into the Spanish planning process.

REE is a publicly listed company, and to guarantee its independence, ownership in it is

limited by law. The state must own at least 10% of shares, while other entities may hold

no more than 5% of shares or use no more than 3% of voting rights. For electricity

companies, the limit is 1% of voting rights. The state, via the Sociedad Estatal de

Participaciones Industriales (SEPI), owns 20% of shares, while the other 80% is well

diversified, with the largest owners being several investment funds with a stake of around

3% each. By law, REE cannot own any shares in companies involved in the generation or

supply of electricity or gas.

Spain’s electricity market is dominated by three main generators: Grupo Endesa, Iberdrola

and Naturgy. Combined, they account for an estimated 50% of the Spanish electricity

market by consumption volume. Their market concentration has fallen in recent years as

electricity is increasingly generated by renewable energy sources, whose ownership is

relatively fragmented.

Distribution companies are responsible for operating, maintaining and developing the

distribution network. They are also the owners of the distribution networks. In Spain, there

are 333 distribution companies; 5 of them are dominant. These 5 companies, with more

than 100 000 consumers connected to their grids, are part of the main electricity

companies in the country and carry out their activities in compliance with the unbundling

requirements that are established in the electricity sector regulatory framework and in

European law. The other companies are small ones linked to historical development of the

local networks. As of 30 September 2019, the five largest suppliers supplied 84.9% of total

supply points in the free market (three years earlier they had supplied 90.4%).

There is no centralised planning process for the distribution grid, although the government

imposes a spending cap on distribution network plans, which are defined over periods of

three years.

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116

Electricity market operation

Wholesale markets

The wholesale electricity market is structured in forward markets, day-ahead markets,

intraday markets and adjustment services (integrated by the solution of technical

restrictions and balancing services). In addition to the organised markets, physical bilateral

contracts are possible between qualified consumers and producers. This non-organised

part of the market has increased rapidly since 2007.

The day-ahead and intraday markets (within which a distinction is made between the

continuous intraday common European market, XBID, and the intraday market by

auctions) cover the daily and hourly horizons, and are managed by the nominated

electricity market operator for the Iberian market, OMIE.

In addition, in the day-ahead and intraday horizons, there is also bilateral contracting with

freely established physical delivery between market subjects in unorganised markets.

Among the markets managed by the system operator (REE) are those related to system

adjustment services, which comprise:



Solution of technical restrictions: Adjustment service whose purpose is to resolve the

technical restrictions of the system, by limiting and modifying, where appropriate, the

production programmes of the generation and consumption units that resolve the identified

technical restrictions with the lowest cost for the system, and the subsequent rebalancing

of generation and demand to compensate for the incorporated programme modifications

to resolve the identified technical restrictions (including curtailment and redispatch

measures).



Balancing services managed by market mechanisms:



Secondary regulation: Optional service that aims to maintain the generation-demand

balance, automatically correcting deviations from the planned exchange programme of

the “Spain” Control Block and deviations in frequency of the system. Its time horizon of

action reaches from 20 seconds to 15 minutes. This service is remunerated through

market mechanisms for two concepts: availability (regulation band) and utilisation

(energy). The secondary dimming power corresponds to the European standard product

of automatic reserve for frequency recovery.



Tertiary regulation: Service of a voluntary nature and compulsory offer managed and

remunerated through market mechanisms that aims to resolve the deviations between

generation and consumption and restore the secondary regulation reserve used. The

tertiary regulation reserve is defined as the maximum variation of power that a

production unit can make in a maximum time of 15 minutes, and that can be maintained

for at least 2 hours. Tertiary regulation power corresponds to the European standard

manual reserve product for frequency recovery.



Deviation management: The deviation management mechanism is a service of a

voluntary nature managed and remunerated through market mechanisms that aims to

resolve the deviations between generation and consumption that could be identified after

the close of each session of the intraday market and up to the beginning of the horizon

of effectiveness of the next session. Deviation management energy corresponds to the

European standard balance energy product from replacement reserves.

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ENERGY SECURITY

In accordance with the provisions of EU Regulation 2017/2195, establishing a directive on

the electricity balance, and in order to contribute to the development of the internal

electricity market, the management of balancing markets, currently limited to the national

level, will be managed through European balancing platforms for each of the services in

the coming years.

The above markets are complemented by the forward markets, which are a set of markets

in which, with years, months, weeks or days prior to the physical delivery of energy,

electricity purchase and sales contracts are exchanged with delivery terms of more than

24 hours. These include bilateral contracts or contracting through organised markets,

organised auctions or bilaterally between agents (the so-called “over-the-counter” market).

In Spain, the organised electricity futures market of MIBEL is managed by OMIP.

In 2018, there were a total of 92 generators and 355 traders participating in the Spanish

wholesale market. Additionally, according to the last annual report prepared by OMIE for

the year 2019, the total energy traded in the day-ahead and intraday markets was

267 TWh (229 TWh on the day-ahead market and 38 TWh on intraday markets), 4% lower

than in 2018.

Retail markets

According to data from the CNMC, as of 30 September 2019, the electricity market was

made up of 29.5 million supply points, of which 11 million were supplied through a

reference marketer (37.4%) while the remaining 18.5 million were supplied through a

marketer in the free market (62.6%) (see section on regulated prices for details on

reference marketers).

The same data show that five traditional suppliers supplied 84.9% of the total supply points

in the free market (down from 90.4% three years prior). The other suppliers, so-called

independent marketers, supplied 15.1% of supply points (up from 9.8% in three years).

Among them, CIDE HC Energía (2.1% share), Fenie Energía (2%), Grupo Audax (1%),

Clidom Energy/Holaluz (1%), Aldro Energía y Soluciones (0.7%) and Flip Energía (0.6%)

were the largest.

On a sectoral basis, market concentration in both the small and medium-sized enterprise

(SME) and industrial sectors is lower than that in the household sector. As of 31 March

2019, the share of the five main marketing groups in the household sector represented

85.9% of the total, while for the SME and industrial sectors, the shares were 64.8% and

70.3%, respectively.

The rate of switching suppliers for the quarter ending in September 2019 stood at 2.3%

(by segments: 2.1% for households, 4.6% for SMEs and 6.2% for industrial consumers),

representing a slight reduction during the most recent quarter ending in March 2019 of

0.2 percentage points.

The average change times of electricity suppliers were reduced to 7.4 days, compared to

7.7 days in the previous quarter (and compared to the third quarter of 2017 and 2018,

when the average change time was 10.2 days and 8.5 days, respectively).

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118

Electricity systems in non-peninsular territories

The non-peninsular territories in Spain are made up of the archipelagos of the Balearic

Islands and the Canary Islands, and the autonomous cities of Ceuta and Melilla.

Production of electricity in non-peninsular electrical systems is subject to a single

regulation, due to the particularities of these systems based on their size, reduced

economies of scale and limited fuel supply.

For this reason, current regulations hold that electricity generation in non-peninsular

territories is excluded from the peninsular supply system. It is remunerated by taking as a

reference the price structure of the peninsular system, to which additional remuneration

can be added to cover the specific costs of these systems that could not be covered by

the income obtained. Additionally, regulations foresee the promotion of renewable energy

in these systems, when technically acceptable, to reduce costs.

In this regard, the electricity generation in non-peninsular territories is excluded from

participation in the liberalised peninsular electricity market (and the European internal

market), and there is a mechanism for dispatching production units in order of economic

merit to cover expected demand. The system operator oversees the economic dispatch of

production units that must operate in each system, based on the variable costs of the

generating facilities. All generation facilities participate in this dispatch, with priority

dispatch granted, at equal dispatch variable cost, for facilities that use renewable energy

sources.

Although production and dispatch activities in non-peninsular territories are regulated,

electricity trading is an unregulated activity, with a large number of trading companies

operating in these territories.

In 2019, the combined generation of non-peninsular territories was 13 712 gigawatt hours

(GWh), about 5% of Spain’s total.

7. ELECTRICITY

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ENERGY SECURITY

Trade and interconnections

Currently, Spain is electrically interconnected with Andorra, France, Morocco and

Portugal.

Figure 7.4 Spain’s current interconnections with neighbouring countries

Source: REE (Red Eléctrica de España) (2021), "Map of current international electricity interconnections",

Strengthening interconnections, Grupo Red Eléctrica, Madrid, www.ree.es/en/red21/strengthening-interconnections

Spain’s net trade includes imports and exports with neighbouring countries (France,

Morocco and Portugal) (Figure 7.5). Spain imported 12.8 TWh from France in 2019 and

exported 3.1 TWh, resulting in net trade with France of 9.7 TWh. Spain imported 4.7 TWh

of electricity from Portugal and exported 8.1 TWh in 2019, resulting in 3.4 TWh net export

in 2019. Lastly, it exported 0.4 TWh to Morocco in 2019 and imported 1.2 TWh. Spain’s

electricity trade in 2019 resulted in 6.9 TWh, with 18.7 TWh total imports in 2019 and

11.9 TWh in 2019 total exports.

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Figure 7.5 Spain’s electricity trade by country, 2000-19

In recent years, Spain has imported the most electricity from France, followed by Portugal;

net exports were the greatest to Morocco.

Note: TWh = terawatt hour.

Source: IEA (2021a), IEA World Energy Statistics and Balances (database), www.iea.org/statistics

Interconnection with France is carried out through four direct current (DC) lines. Current

interconnection capacity with France is 2 800 MW (representing a ratio to installed capacity

of 2.8%), having doubled after the commissioning in 2015 of the Santa Llogaia-Baixas line.

The DC interconnection project through the Gulf of Biscay, currently under construction,

will nearly double interconnection capacity to France to 5 000 MW (5% of total installed

capacity) once it is completed (expected in the third quarter of 2027). Given relatively low

levels of interconnection at present, capacity with France was congested for 80% of hours

in 2019.

Interconnection with Portugal is carried out through 11 alternating current (AC) lines.

Current interconnection capacity with Portugal is 2 300 MW (2.3% of installed capacity).

In contrast to France, interconnection capacity with Portugal in 2019 was congested only

5% of hours. The construction of a new interconnection between Vila Fria-Vila do

Conde-Recarei (Portugal) and Beariz-Fontefría (Spain) is in the planning phase; once

completed, it will increase the exchange capacity between Spain and Portugal to

3 000 MW (allowing Portugal to reach an interconnection level of 10%).

Interconnection capacity between Spain and Morocco is 900 MW in the Spain-Morocco

direction and 600 MW in the Morocco-Spain direction by means of two DC submarine

electrical cables.

Lastly, Spain’s interconnection with Andorra is carried out through the Benós-Lac D’Oo

line.

Once system operators agree – under the security criteria required by both systems – on

how much interconnection capacity can be made available for commercial use, financial

bidding is opened to agents, buyers and sellers, either through organised markets or

through capacity auctions. The interconnection between Spain and Portugal is managed

through MIBEL, whose market operator is OMIE. The commercial interconnection capacity

between Spain and France is allocated through capacity auctions carried out by REE

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in Spain and RTE in France for various time horizons: annual, monthly, daily and intraday.

For interconnections with both Portugal and France, system security takes precedence

over commercial exchanges of electricity.

The Spanish national master plans for transmission infrastructure are focused on

identifying system needs in the medium term and defining sufficient and cost-efficient

infrastructure projects and timelines. They are prepared in line with European planning

processes (Europe’s Ten-Year Network Development Plan) and incorporate ENTSO-E

best practices.

Spain’s interconnection capacity with the rest of continental Europe relative to its installed

power capacity is still below the EU objective of 10% by 2020 and 15% by 2030. As such,

Spain and the European Council continue to collaborate on the issue of electricity

interconnections, including as it relates to the Madrid Declaration of 2015 between Spain,

France, Portugal, the European Commission and the European Investment Bank. This is

necessary to transition the Iberian peninsula away from being an energy island to create

a true European energy market according to the EU Clean Energy Package published in

June 2019.

After 2020, the planning annex includes the following interconnections with France:



Basque Country (Gatica) – France



two alternatives: Basque Country (Ichaso) – France or Navarra (Muruarte) – France



Aragón (Ejea de los Caballeros) – France.

Electricity prices

Spain’s electricity prices for industry are above average among IEA countries, at

122.7 USD/MWh in 2019. However, its tax component is quite low, at 5%, in comparison

to other countries (Figure 7.6).

For household electricity prices, Spain is also among the highest in IEA countries (fifth

overall), at 287.7 USD/MWh in 2019, with taxes accounting for 21% (Figure 7.7).

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Figure 7.6 Electricity price for industry in IEA member countries, 2019

Spain’s industry electricity prices are above the median price for IEA countries.

Notes: MWh = megawatt hour. For industry prices, data are not available for Australia, Japan, Mexico, New Zealand

or Norway. Tax information is not available for the United States.

Source: IEA (2021b), Energy Prices and Taxes 2019 (database), www.iea.org/statistics

Figure 7.7 Electricity prices for households in IEA member countries, 2019

Spain’s household electricity prices are among the highest within the IEA.

Notes: MWh = megawatt hour. For household prices, data are not available for Japan, Mexico or Norway. Tax

information is not available for the United States.

Source: IEA (2021b), Energy Prices and Taxes 2019 (database), www.iea.org/statistics

Spain’s industry and household electricity prices over the past two decades have followed

trends similar to those of its neighbouring European countries, although from 2000 to 2009,

Spain’s electricity prices for industry increased more sharply than those of its neighbours,

from 42.6 USD/MWh in 2000 to 91.3 USD/MWh in 2006 and 138.8 USD/MWh in 2009

(Figure 7.8). Spain’s household prices have been higher on average than its neighbours

since 2016, reaching 287.7 USD/MWh in 2019 (Italy was at 289.2 USD/MWh in 2019 and

Portugal at 242.4 USD/MWh). However, the price differential between Spain and its

neighbouring countries (France, Germany) has been closing thanks to the penetration of

low-cost renewables in recent years, a trend that is expected to continue over the coming

years to bring Spain’s electricity prices below those of its neighbours, according to the

European Energy Exchange’s futures for 2022-23.

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Tax component

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Notably, though electricity prices in Spain are above average in an EU comparison, prices

for hydrocarbons are lower, with a disproportionate share of taxes and levies imposed on

electricity relative to other forms of energy.

Figure 7.8 Electricity prices in Spain and selected IEA member countries, 2000-19

Industry Households

Spain’s electricity prices are around average compared to prices in neighbouring European

countries.

Notes: MWh = megawatt hour. Data are not available for Greece in 2006 and 2007.

Source: IEA (2021b), Energy Prices and Taxes 2019 (database), www.iea.org/statistics

Electricity market regulation

The Ministry for the Ecological Transition and the Demographic Challenge and within it,

the Secretary of State for Energy, is the main energy authority in Spain, including as it

relates to the electricity sector.

The national regulatory authority, the CNMC, is the regulator for several sectors, including

electricity. In particular, it oversees daily and intraday market rules as well as operating

procedures of system operation, including balancing markets and non-frequency markets,

all governed by EU law. The CNMC also sets out the methodology for calculating network

access tariffs according to transmission and distribution costs and supervises access to

cross-border interconnections. At the EU level, the CNMC co-operates with other

regulators through the Council of European Energy Regulators and the Agency for the Co-

operation of Energy Regulators on developing network codes and implementing the

internal electricity market.

The Spanish electricity sector has undergone a profound transformation since 1998, when

it was characterised by a vertically integrated monopoly structure for various Spanish

regions. Law 54/1997 on the Electricity Sector marked the beginning of the process of

progressive liberalisation of the sector by opening networks to third parties, establishing

an organised market for energy trading and reducing public intervention in the

management of the system.

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Spain France Italy Greece Portugal

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The basic rule that currently regulates the structure and operation of the sector is

Law 24/2013 on the electricity sector, which maintains the distinction between regulated

and non-regulated activities, while promoting effective competition in the sector by

introducing, among other measures, increased competition of supplier companies,

improved consumer access to information and facilitation of the supplier switch processes.

Spain’s electricity sector is also guided by EU regulation, most recently updated as part of

the Clean Energy Package. Spain is currently in the process of transposing EU directives

and regulations (including the Directive on Common Rules for the Internal Market for

Electricity, the Regulation on the Internal Market for Electricity, and the Regulation on

Risk-preparedness in the Electricity Sector) into its national laws. Some important

concepts, such as storage, independent aggregators and renewable communities, were

recently introduced by Royal Decree-Law 23/2020, which approved measures in the field

of energy and other areas of economic recovery from COVID-19.

Tariff deficit

Spain has made considerable headway in managing a tariff deficit in its electricity system

caused by very generous subsidies for renewables, which reached a peak of

EUR 6.3 billion in 2008 (Figure 7.9). Since reforms enacted in 2013, system costs have

been balanced, and a small surplus was even recorded in the 2014-18 period. A small

deficit is expected for 2019, though surpluses from previous years will cover it.

Figure 7.9 Spain’s electricity system tariff balances, 2000-18

Source: Spanish government response to the IEA questionnaire.

Regulated prices

In accordance with Spain’s current regulatory framework for the electricity sector,

competition for electricity constitutes a liberalised activity in which consumers have the

option to freely choose their provider among a wide range of electricity marketers. The

conditions for the supply of electricity are determined through a supply contract agreed by

both parties, fulfilling the obligations established by law regarding the contracting of

electricity supply (the “free market”).

However, smaller consumers – low voltage connected consumers with contracted power

less than or equal to 10 kilowatts (kW) – also have the option of being supplied by one of

eight reference suppliers, designated by the government in the “regulated market”. In

choosing one of these marketers, consumers can opt for the voluntary price for the small

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consumer (the PVPC) or for a fixed price for one year. The PVPC is a price determined

from the hourly prices indexed to the wholesale electricity market price, while the fixed

price is established by the reference marketer (both figures are regulated in Royal

Decree 216/2014, which establishes the methodology for calculating prices for the small

consumer of electricity and its legal contracting regime).

The PVPC has a general structure that includes tolls and charges associated with the point

of supply as well as the cost of the energy consumed, which refers to the cost of the

day-ahead market for production of electricity. Additionally, the PVPC takes into account

the marginal prices obtained in the intraday market auctions as well as all the costs

associated with the supply of energy (remuneration of the OMIE, remuneration of REE,

costs associated with payments for capacity mechanisms and interruptibility service, etc.).

Therefore, although it is a regulated price, it is indexed to wholesale electricity market

prices.

Alternatively, consumers can purchase energy directly from generators, as so-called direct

consumers in the market. Since 2017, there has been an increase in the number of direct

consumers, whose consumption in 2018 represented 2.5% of total energy, up from 1.6%

in 2017.

According to the CNMC, on 31 December 2019, the Spanish retail market consisted of

28 314 200 consumers with an annual electricity consumption of 233 656 GWh. Of these,

94% were domestic consumers with power less than 10 kW, and the remaining 6% were

domestic consumers of more than 10 kW, SMEs and industrial facilities. Of the 94% of

smaller consumers, 38.3% were in the regulated market while 61.7% had a contract in the

free market. Industry accounted for 54% of consumption, while consumers with power

equal to or less than 10 kW accounted for 27.5%, and SMEs and households with more

than 10 kW accounted for 18.5%.

Social bonus

Royal Decree 897/2017 set out measures to regulate vulnerable consumers, the social

bonus and other protection measures for domestic consumers of electricity, with the goal

of ensuring access to universal electricity supply as a general social good. In 2018, the

government adopted Royal Decree 15/2018, which reinforced and expanded the

assumptions to qualify for the electricity social bonus. The revisions also extended the

programme to include a “thermal” social bonus, financed by the national budget (around

EUR 100 million annually) to help vulnerable consumers pay for their heating needs.

Specifically, the designated reference suppliers (see above) are obligated to supply

consumers that have been classified as vulnerable. In accordance with regulations,

vulnerable individuals are those with a connection less than or equal to 10 kW and meet a

series of socio-economic criteria, including: income criteria, being a large family, or

pensioners of the Social Security System due to retirement or permanent disability,

receiving a minimum amount. Those who meet these requirements can receive a discount

of 25% on their electricity bill, called the social bonus.

Additionally, the decree created a category of severe vulnerable consumer, which requires

compliance with more demanding income requirements than those for standard vulnerable

consumers. Assuming compliance with these requirements, the social bonus discount on

the electricity bill is 40%.

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Finally, a category of consumer at risk of social exclusion was created, as a severely

vulnerable consumer who is attended by the social services of an autonomous or local

administration. In this case, at least 50% of the amount of his/her bill is covered.

Around 1.3 million consumers benefit from the social bonus in its various categories. As of

31 December 2018, 52% were classified as vulnerable, 47% as severely vulnerable and

less than 1% as at risk of social exclusion. An estimated EUR 150 million/year in discounts

are granted, with costs borne by the suppliers. These measures are part of Spain’s

National Energy Poverty Strategy 2019-2024, which will take a more comprehensive

approach to addressing energy poverty over the medium and long term.

Due to the COVID-19 pandemic, a new category of vulnerable customers was identified

as self-employed consumers whose income does not exceed certain thresholds and

whose income has been reduced by the crisis (around 5 000 consumers). Moreover, in

September 2020, the social bonus was extended by royal decree to people who have been

temporarily laid off due to COVID-19.

National Fund for the Sustainability of the Electric System

In an effort to reduce electricity bills for consumers, in December 2020 the government

issued the draft Law on establishing the National Fund for the Sustainability of the Electric

System. Specifically, the policy would reallocate the levies associated with subsidies for

renewables, co-generation and waste to energy companies across the energy system (oil,

gas and electricity companies based on annual sales volumes). Previously, electricity

end users assumed 100% of the costs associated with renewables payments, while

conventional fuel consumers did not pay anything for these subsidies.

The law would serve three main purposes: 1) avoid increases in electricity prices;

2) provide clear signals regarding electrification of the economy; and 3) send appropriate

price signals to investors to mobilise the necessary investments in the energy transition in

the coming years. The amount that would be reallocated, which will take place over five

years, represents approximately 16% of the current household electricity bills. To ensure

fairness and redistribution, there will be exemptions and compensation for those sectors

with less resilience and response to the new system.

Electricity market policies

The development of renewable energy has been a priority commitment of Spanish energy

policy, though the accelerated development of renewable generation that has taken place

over the past decade has presented some challenges for managing the operation of the

electricity system, especially given a very high number of small units of production

scattered throughout the country.

Spain’s National Energy and Climate Plan (NECP), submitted to the European

Commission in January 2020, foresees for the year 2030 total installed power in the

electricity sector of 161 GW, of which 50 GW will be wind power, 39 GW solar PV, 27 GW

combined cycle gas (corresponding to existing combined cycle capacity), 15 GW hydraulic,

9.5 GW pumping, 7 GW solar thermoelectric and 3 GW nuclear, as well as minor capacities

of other technologies (EC, 2020). As a result, renewable generation in 2030 will be 74%

of total electricity generation, toward a trajectory of 100% renewable electricity in 2050.

Though the total annual installed capacity of renewables committed in the NECP is fixed,

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the precise breakdown between technologies will vary based on the costs and

assumptions considered in the modelling exercises.

The outlook envisaged in the NECP assumes 6 GW of storage capacity by 2030, provided

by pumping and batteries, which together with other sources of system flexibility and

demand management will allow for greater integration of variable renewable generation

into the system, ensuring continued security of supply. The recently approved Energy

Storage Strategy extends the target for storage capacity requirements to around 20 GW

in 2030.

Figure 7.10 Installed power capacity in Spain’s NECP’s target scenario

Notes: GW = gigawatt. PV = photovoltaic.

Source: Spanish government response to IEA questionnaire.

Since the start of its electricity market liberalisation in 1998, Spain has maintained capacity

payments for conventional generation, including a subsidy for hydropower, natural gas,

fuel-oil and coal-fired generators for their availability to the system. This incentive has been

suspended since June 2018 and formally derogated since January 2019. The government

is currently considering the possibility of a new capacity mechanism based on concerns

about ensuring sufficient flexible gas-fired generation in the system, compliant with EU

law. A public consultation on the issue was launched in September 2020, though a final

decision on whether a capacity mechanism is needed has not been taken.

Spain also offered an investment subsidy to hydropower, natural gas, fuel-oil and coal-fired

plants built after 1997 with more than 50 MW installed capacity that sold to wholesale

power markets. Currently, no investment incentives are available for new conventional

plants and total payments under the previous scheme are decreasing every year.

However, coal power plants receive payments in order to finance upgrades aimed at

reducing their environmental impact (e.g. sulphur-scrubbing units). These payments were

scheduled to end in 2020.

Coal phase-out

As part of its climate change and energy transition agenda, Spain has a plan to phase out

the use of all coal-fired electricity, driven by unfavourable market conditions rather than

policy mandates.

The NECP expects that up to 9 of Spain’s 15 coal-fired power plants (as of 2019) will no

longer be in service by 2021. Already, based on market conditions, on 30 June 2020, 8 of

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Spain’s operational 14 coal-fired plants with around 4.6 GW of capacity shut down. Three

more have asked for permission to close in 2021 and another one is expected to close

in 2022. Moreover, one plant in Majorca only operates on a limited basis (around

500 hours annually after 2021).

Spain expects that by 2030, coal-fired power plants will no longer be competitive and coal

will be fully phased out of the power sector. Accordingly, the government plans to offer

support measures to affected regions to help them adjust to the transition (see Chapter 9).

Nuclear phase-out

Spain’s NECP also foresees an orderly and staggered closure of the country’s nuclear

power plants within the 2027-35 time frame. The planned retirements of Spain’s existing

fleet of seven reactors (7.4 GW of installed capacity) will begin in 2027, and by 2030,

around 4 GW of installed nuclear capacity is planned for an orderly final shutdown (see

Chapter 8).

Following the coal and nuclear closures, natural gas-fired generation will become the

predominant source of dispatchable power in Spain’s electricity system to balance out the

growth in variable renewables generation.

Renewables

Spain’s NECP expects to achieve a 42% share of renewables in total end use of energy

by 2030. This level will be led by the electricity sector, where the plan projects the

installation of about 59 GW of new renewables generation through 2030, led by wind and

solar, amounting to 74% of total electricity generation that year. This will put Spain on a

pathway toward achieving its 2050 objective to source 100% of its power from renewable

sources, in line with its 2050 carbon neutrality goal.

To achieve its ambitious targets for renewables in electricity, Spain envisions a

three-pronged strategy: 1) the promotion of large generation projects; 2) the deployment

of own consumption and distributed consumption; and 3) measures to integrate

renewables into the electricity system and market (see Chapter 5). The NECP considers

auctions to be the main tool for developing these technologies, in accordance with EU

Directive 2018/2001 on the promotion of the use of energy from renewable sources.

Self-consumption and distributed generation

Spain is also seeing a growing number of self-consumers (notably rooftop PV and

co-generation, and, to a lesser extent, small-scale wind), defined as consumers who

generate electricity for their own consumption. The government considers self-

consumption to be an important component in the growing share of renewables in

electricity generation.

Spain recently updated its regulatory framework with respect to self-consumption in an

effort to boost its uptake. The first regulation put in place in 2015 required self-consumers

to pay a small fee for self-generated energy, even if they did not feed any power into the

grid and required power generated to be less than or equal to power consumed. Since

then, Royal Decree 244/2019 (to implement EU Directive 2018/2001 on the promotion of

the use of energy from renewable sources) put in place clearer definitions of

self-consumption, simplified compensation schemes, and streamlined technical and

administrative requirements.

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The royal decree defines both individual self-consumption and so-called collective

self-consumption, which is comprised of several participants (the 2015 regulation was

centred on individual self-consumption). The government sees collective self-consumption

as an attractive opportunity to expand renewables capacity as it offers more efficient use

of limited space in urban areas as well as lower investment costs per user and the ability

to share technical, administrative and operational knowledge.

Moreover, the royal decree also enabled the participation of new agents in

self-consumption schemes, notably energy service providers that have technical

know-how in the field. The required knowledge to operate a self-consumption initiative was

one of the main entry barriers that the new regulation sought to eliminate. In this regard,

energy service providers can offer the best and latest technical solutions to self-consumers

as well as run and manage the schemes from an operational perspective.

Other potential participants in self-consumption schemes are local administrations and

non-governmental organisations, which can help organise people with fewer resources.

Moreover, self-consumption schemes can be used as a testing ground for larger schemes,

such as renewable energy communities.

Self-consumption is also expected to be a driver for other technologies and actions,

including storage initiatives, grid modernisation and expansions, as well as electricity

meter upgrades.

At the same time, self-consumption can lead to technical challenges for integrating a large

number of generation points onto the distribution grid. In particular, the increasing number

of self-consumers means that more and more generation will be connected to distribution

grids and distributions service operators (DSOs) will have to adapt these grids to meet the

technical demands this change requires. The government expects to meet this challenge

by adopting the latest grid-edge technologies as well as by undertaking investments to

strengthen grid resilience and flexibility, especially on distribution networks.

System integration of renewables

In recent years, Spain has made headway in improving its system flexibility to integrate

more variable renewables, including: allowing renewable energy and co-generation

facilities to participate in balancing services; technical and regulatory work at the national

and European level for the development of pan-European imbalance netting services

(REE began participating in the IGCC imbalance netting platform in September 2020);

regulation to allow demand-side response to participate in balancing markets; and

updating network connection codes.

Looking ahead, Spain’s ambitious target to source 74% of electricity generation from

renewables by 2030 will require additional measures to ensure smooth system integration

of variable renewables, notably solar and wind. To this end, Spain’s NECP includes

several measures to facilitate the integration of renewables, including measures on

“demand management, storage and flexibility” and on “adaptation of electrical networks

for the integration of renewables” (EC, 2020).

With respect to demand response, the NECP foresees the introduction of economic

incentives, more efficient technologies and changing consumer habits to promote demand

management. In this regard, the government is planning to facilitate the development of

demand aggregators and demand management plans as avenues for various players to

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participate in demand response services. The concept of the aggregator was introduced

in Royal Decree-Law 23/2020 and more detailed regulation is expected to follow.

Moreover, the NECP foresees 6 GW of electricity storage capacity to be in place by 2030.

The specific type of storage will be informed by technological developments over the

coming decade. The Ministry for the Ecological Transition and the Demographic Challenge

has developed the Energy Storage Strategy to support the goals of the NECP. The

strategy was approved by the Council of Ministers in February 2021. The Energy Storage

Strategy expands the storage necessities of Spain’s energy system; beyond the referred

capacity envisaged in the NECP, the strategy includes capacity from the electric vehicle

fleet, behind-the-meter energy storage systems and large-scale energy storage attached

to concentrated solar power plants, which would result in total storage capacity of around

20 GW in 2030. Royal Decree-Law 23/2020 also introduced the concept of storage as a

regulated activity, which is now pending more detailed regulation. The royal decree also

granted permission for hybrid storage and renewables facilities.

Lastly, the government also sees expansion of grids and interconnectors as an important

component in managing the integration of larger levels of variable renewables. The

upcoming Network Plan, covering the period 2021-26, is aligned with the NECP’s targets

and is mainly focused on renewable energy integration, which will require additional

network development as well as improving the optimisation of the existing grid. A public

consultation process on the proposed Network Plan was launched in February 2021, with

a target to approve the plan by the end of 2021. Though renewables curtailment levels are

relatively low at present, at 0.23% in 2019, the government expects them to rise to 14.8%

in 2026 based on a business-as-usual scenario for the transmission network. However, it

projects that curtailment would drop to 4.5% in 2026 based on the network plans under

development. In a similar vein, interconnectors, especially with France, will also play an

important role in balancing the growth in variable renewables generation across a broader

geographic footprint (see above section on interconnections).

Smart meters

Spain first put in place a Smart Meter Plan back in 2007, which has been updated several

times since then. As a result, at the end of 2019, 99.64% of electric meters had been

replaced with smart meters for consumers with contracted power of less than 15 kW, and

99.38% of them have been effectively integrated into remote controlling systems.

A new operating procedure was approved on 11 December 2019 that obliges distribution

companies to provide their customers with the measurement data from their smart meters,

especially the hourly consumption curve. In addition, though not currently compulsory,

over 75% of metering systems for consumers with contracted power between 15 kW and

50 kW have been replaced by smart meters (and 95% integrated into remote control

systems).

The government expects that the current regulation for smart meters will be updated to

define new functionalities and protocols, deployment plans, as well as data management

and data-sharing rules. These can then serve as leverage for the development of various

energy services, business models and increased behavioural change in prosumers.

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COVID-19 measures

As Spain addresses the economic implications of the COVID-19 pandemic and related

lockdowns, the government approved several measures to assist the electricity sector and

consumers. In particular, Royal Decree-Law 11/2020 from 31 March, which adopted urgent

social and economic measures to deal with COVID-19, included the following measures

related to the electricity sector:



Supply guarantee measures: supply guarantees prohibited the interruption of supply of

electricity, natural gas and water to consumers.



New category of vulnerable consumer: a new category of vulnerable consumers was

created with the option of claiming the social bonus, constituted as a discount on the

electricity bill. This category corresponds to self-employed workers affected by the closure

measures of establishments that meet certain income requirements.



Contract flexibility measures: any company could temporarily suspend supply contracts, or

modify them to adapt to new consumption patterns, without any surcharge as a

consequence of these alterations in the contracts.



Bill suspension measure: applicable only to small and medium-sized enterprises, allowing

the option to temporarily suspend bills for electricity and natural gas consumption for a

period of six months following the end of the state of emergency due to COVID-19.

Moreover, Royal Decree-Law 23/2020, also aimed at stimulating the economy, includes

measures to maintain and revitalise investments in transmission and distribution network

assets, which were previously defined in regulation as a share of GDP. In doing so, the

government aimed to prevent a sizeable drop in grid investments and digital upgrades that

will be instrumental to the energy transition.

Electricity security

Risk preparedness

The legislative framework for electricity security at the national level consists of EU

Regulation 2019/941 on risk preparedness in the electricity sector and Spain’s Law 8/2011,

which establishes measures for the protection of critical infrastructure in Spain.

Currently, and in collaboration with the TSO REE, the national analysis of the regional crisis

scenarios identified by ENTSO-E is being carried out by the Directorate General for Energy

Policy and Mines. The analysis is in accordance with the methodology approved by the

Agency for the Co-operation of Energy Regulators, in compliance with Article 6 of EU

Regulation 2019/941. Among these regional crisis scenarios, at least two are related to

cybersecurity. In a second stage, and once the analysis of the impact at the national level of

the regional crisis scenarios has been completed, the most relevant national electricity crisis

scenarios will be identified, in compliance with Article 7 of EU Regulation 2019/941.

The identified national crisis scenarios will be reviewed at least every four years. Based on

the identified regional and national crisis scenarios, the Directorate General for Energy Policy

and Mines, in collaboration with REE, will prepare a risk preparedness plan, which will

include all those measures necessary to prevent electricity crises, prepare for them or

mitigate them.

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Measuring outages

With respect to outages on the transmission network, three indexes measure the quality

of electric supply service due to incidents on the grid:

1. Energy not supplied (ENS): measures the energy cut from the electricity system

due to incidents in the electricity system transmission. It is measured in MWh.

2. Average interruption time (AIT): the relation between the energy not supplied and

the average power of the system. It is measured in minutes. The reference value

established in current legislation is set at 15 minutes.

3. Non-availability rate: indicates the percentage of total time of the year during which

transmission lines have not been available for service due to outages and

maintenance.

Reliability planning

Operating Procedure 13.1 (OP 13.1), approved by the Resolution of 22 March 2005 by the

General Secretariat of Energy, establishes the technical criteria for development of the

transmission network. Among the criteria developed by OP 13.1 is a set of reliability

criteria, including the technical criteria, reinforcement criteria and network meshing criteria.

The technical criteria established in OP 13.1 are of great importance due to their direct

relationship with the reliability and quality of supply, making it possible to face events of

different types that pose risks to security of supply. Among these criteria are the suitability

criteria of the system, which determine the contingency situations that the system must

endure in a permanent regime. In this regard, the transmission network is designed to

withstand two different contingency levels: Level 1 (N-1) and Level 2 (N-2), where demand

varies.

Compliance with the N-1 level takes into account all the individual incidents of lines and

transformers in the transmission network and the largest generation groups in an area. In

case of non-compliance, this level will require network development. In the N-1 situation,

the system must be designed to not cause market outages or to permanently overload

lines and transformers.

In an N-2 situation, contingencies that affect two elements of the network are taken into

account, making sure that in this circumstance, the behaviour of the system is adequate,

not allowing any market losses or permanent overloads above a certain level. The

analyses at the N-2 level include loss of multiple lines, as well as the loss of nodes of high

concentration of transformation (> 1 500 megavolt amperes [MVA]), high concentration of

generation (> 1 000 MW) and nodes considered critical from the safety perspective of the

system against fault clearance (the critical time is the maximum time that the system

withstands a permanent three-phase fault meeting the safety criteria). Level N-2 security

can be achieved with network development or other operational measures based on the

cost/risk assessment of the different alternatives.

In addition to the suitability criteria, the technical criteria that the Spanish grid network

must meet in accordance with the provisions of OP 13.1 include criteria associated with

dynamic behaviour, maximum short-circuit currents, and maximum generation and

supply capacity in a node, among others. Likewise, the network design criteria impose

7. ELECTRICITY

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ENERGY SECURITY

other obligations, such as limiting the number of unmeshed nodes between meshed

nodes, thereby increasing security.

Moreover, the Spanish TSO employs several measures, processes and tools in its

resilience strategy to face potential disruptions, including:



operating the system through two control centres that operate in parallel with the ability to

provide symmetric backup between them



special protection schemes, which include a set of co-ordinated and mostly automatic

measures to ensure fast reaction to large disturbances and to avoid their propagation

through the system



the interruptibility service, which is a demand management tool to provide a rapid and

efficient response to the electric system’s needs according to technical and economic

criteria



the load shedding strategy used in cases in which, due to a severe incident, the balance

between generation and demand cannot be maintained through the foreseen control

measures



specific plans called “emergency/safeguard plans” for those cases in which an outage

requires special measures to fulfil security criteria and the continuity of electricity supply



the restoration process and its plans, corresponding to different geographical areas that

aim to return the system to normal after a severe incident that causes load disconnection



regular training of operators and common trainings and simulations with the other electricity

system stakeholders, including neighbouring TSOs



contingency plans in the maintenance of the transmission infrastructure to resolve urgently

any failure.

Electricity system resilience

Though the government considers the overall Spanish electricity network to be resilient in

situations of permanent or temporary loss of its elements, non-peninsular areas can face

more challenges. In response, in recent years, the government has made a significant

effort to reinforce interconnection levels between islands in the non-peninsular territories,

and for the Balearic Islands, a connection with the peninsular territory.

The current transmission network plan includes two new links between islands in the

Canary archipelago:



Lanzarote-Fuerteventura 132 kV link



Tenerife-La Gomera double circuit 66 kV link.

The Balearic system plan includes:



Mallorca-Ibiza 132 kV link that gives rise to the union of the two current subsystems

Mallorca-Menorca and Ibiza-Formentera



Ibiza-Formentera 132 kV link



a second link Mallorca-Menorca 132 kV.

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On the other hand, the resilience of the transmission network is limited by the low

interconnection capacity with France. Higher exchange capacity values, combined with

proper system design, would further improve the capacity of this network to withstand

contingencies that may occur.

Moreover, regarding the impact of climate change and extreme weather events on power

infrastructure, Spain is currently preparing its updated National Plan for Adaptation to

Climate Change. It contemplates several lines of action, including to prevent the impacts

of climate change on the transport, storage and distribution of energy. This will include

analysis on the impact of climate change on the functionality and resilience of electricity

transmission and distribution networks and define consequent adaptation measures. It will

also identify energy infrastructure that is highly vulnerable to extreme events and promote

specific adaptation programmes as well as integrate the results into successive planning

of the electricity transmission network.

Assessment

Spain’s electricity sector will be subject to major reforms in the next decade as part of the

implementation of the government’s NECP. The plan includes an ambitious target of a

74% share of renewables in electricity generation out of a forecasted installed capacity of

161 GW by 2030, which will be needed to enable the expected sizeable electrification of

the economy. The massive development of renewable energy up to 2030, particularly solar

and wind, will form the basis for reaching the 2050 objective of a 100% renewable

electricity mix. This huge increase of renewables will go hand-in-hand with the ongoing

rapid phase-out of coal power plants and the foreseen closure of nuclear power plants

after 2027. The only conventional generation that is projected to maintain a considerable

share in the generation mix in the next decade is combined-cycle gas generation, with an

expected capacity of 27 GW in 2030.

The Spanish electricity market is part of the common European market through the Iberian

wholesale power market, with full price convergence in the peninsula, except during rare

periods of congestion. Spain has interconnections with all of its neighbours (Andorra,

France, Morocco and Portugal) and is a net importer with France and a net exporter to

Portugal. Currently, the Spanish electricity sector is still dominated by three main

generating companies, but market concentration has fallen in recent years and is expected

to decrease further due to the surge of renewable sources, whose ownership is much more

fragmented.

In recent years, the Spanish government has successfully implemented reforms to

restore the financial stability of the electricity system. The reduction of subsidies for

investments in renewable generation and increased taxes and levies have contributed

to bringing costs and revenues of the sector back in balance. Moreover, the December

2020 announcement to create the National Fund for the Sustainability of the Electricity

System, which will reallocate the costs of renewables subsidies across the energy

system rather than solely on electricity end users, represents a major step toward

rebalancing system costs to align with longer term goals of electrification and energy

transitions. The commissioning of a new interconnector between Spain and France in

2015 (Santa Llogaia-Baixas line) was also an important step and has almost doubled the

previous capacity for cross-border trade of electricity with France.

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ENERGY SECURITY

Moreover, Spain has made considerable improvements in its wholesale electricity market

during the last few years, notably with the start of continuous intraday trading in the XBID

market and the recently installed opportunities for cross-border exchanges of balancing

reserves (TERRE-project). The liquidity of the wholesale electricity market will be further

enhanced by finalising the implementation of European network codes and guidelines,

including through the participation of demand-side response resources in balancing

markets, and the emergence of different regional platforms for electricity balancing in

which the Spanish TSO (REE) will participate. The IEA commends Spain for all of the

above-mentioned developments since its last in-depth review.

The retail market for electricity in Spain is highly concentrated in comparison to other IEA

countries. The traditional five big suppliers are responsible for supplying 85% of

consumers (and even 92% at the household level), although their market share has been

decreasing over the last few years. These same companies own and operate distribution

networks while carrying out all their activities in compliance with the unbundling

requirements as set in the regulatory framework. Also, quarterly switching rates of

electricity consumers are very low, at just 2.3%, and Spain has relatively high electricity

prices for end users compared to other EU countries, partly due to significant tax

components in consumer prices. These characteristics seem to indicate a fairly low level

of retail market competition. However, on a positive note, at the end of 2019, almost 100%

of Spanish households had installed a smart meter.

Moreover 38% of the Spanish market (about 11 million consumers) is covered by a

regulated price regime run by the eight reference suppliers designated by the

government. These consumers pay a so-called voluntary price for small consumers that

is based on the wholesale market electricity price, and marked up with grid costs, taxes

and a distribution margin. This system of regulated prices tends to impede the

development of stronger competition in the Spanish retail market. Price regulation

discourages consumers to shop around and switch supplier. A phase-out of the

regulated regime for a large group of consumers, combined with increased consumer

awareness and the introduction of price comparison tools, will surely open up the retail

market and reduce market concentration. Increased competition is also expected to

lower electricity prices for end consumers. To this same end, the government should

also look at the role of relatively high taxes and levies in the electricity price and evaluate

whether these are still appropriate, notably in comparison to the fiscal treatment of other

fuels and the policy to decarbonise and electrify the energy system.

In addition, Spain has an energy poverty policy in place, which puts an obligation on

reference suppliers to provide a discount to consumers with a vulnerable status, divided

into three categories with increasing discounts. Currently, about 1.3 million Spanish

households benefit from this social tariff. The social tariff (reportedly a total of around

EUR 150 million/year in discounts) is financed by the suppliers. While poverty reduction

for low-income households is an understandable priority, the IEA notes that providing

electricity below cost results in inefficient and non-transparent reallocation, as the

reference suppliers receive no compensation for their losses on these contracts and have

to cross-subsidise these losses with higher prices for other customers. The government

should therefore consider alternative ways to address energy poverty, such as through

social and fiscal policies, or through support for energy efficiency measures. Such reforms

could be embedded in the recently adopted National Energy Poverty Strategy.

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The level of interconnectivity is relatively low and Spain is still far from reaching the political

target of 15% by 2030. In 2019, in particular, the interconnections with France were

recorded to be congested almost every day of the year, with Spain being a net importer

80% of the time. Therefore, a priority of the government is to enhance cross-border

capacities with France to the benefit of the consumers and to increase the resilience of the

Spanish electricity system. The completion of the interconnection through the Gulf of

Biscay will be a valuable step toward this end. Concurrently, the government should

reinforce national grids to ensure that Spain can accommodate increased flows to and

from France.

Increasing opportunities for cross-border trade will also stimulate the further integration of

regional markets and will increase flexibility in the Spanish electricity system, which is

needed to facilitate the rising share of variable renewable energy sources in the market.

Furthermore, a high level of interconnectivity combined with liquid and well-functioning

wholesale markets (including the foreseen cross-border balancing platforms), as well as

the further deployment of demand-side response and electricity storage resources will

considerably contribute to adequacy.

Despite the current overcapacity in the market, different groups of conventional electricity

producers have expressed serious concerns about medium- and long-term adequacy in

Spain. The obvious reason for this is the augmenting share of variable renewables (notably

wind and solar) together with the phase-out of coal and nuclear power plants in the coming

years. The government is currently conducting a consultation on the possible need for a

capacity mechanism to ensure that sufficient backup generation capacity will remain

available to the market during and after the transition. As in many EU countries, this issue

will no doubt be thoroughly debated in Spain in the coming years.

For efficiency reasons, it would not make much sense to create capacity subsidies to

prolong the life cycle of coal and/or nuclear power capacities that are currently scheduled

for closure. It could be argued, though, that a capacity remuneration scheme would help

safeguard the availability of gas-fired power plants until the long-term objective of a fully

decarbonised power market is reached. Still, the IEA does not recommend a capacity

mechanism as a standard solution, due to its typically high costs and tendency to distort

markets and electricity price formation. The Spanish government should instead

concentrate on improving flexibility in the market and creating proper price signals for

investments. In fact, all the components referred to in the previous paragraphs may

contribute to that. At the same time, it remains important for Spain to work on a clear and

effective regulatory framework to accommodate the foreseen closure of coal and nuclear

plants at a pace that meets the needs of the system, while avoiding unnecessary red tape

and added decommissioning costs.

Spain has installed an appropriate framework for strategic network planning that needs to

prepare the grid for facilitating the objectives set by the government in the NECP. The

Spanish TSO, REE, is responsible for operating over 44 000 km of transmission lines. Grid

development is planned every six years and approved by the government. The network

plan that is currently under development will include grid enforcements needed to allow

the integration of a high share of variable renewable energy, while applying the EU

planning process (the Ten-Year Network Development Plan) and ensuring security of

electricity supply. As the time from initial design to commissioning of large infrastructure

projects can be longer than six years, and the next nuclear plants are supposed to close

7. ELECTRICITY

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ENERGY SECURITY

in 2027, just beyond the six-year horizon, the government should consider extending the

planning process to ten years.

At the distribution level (below 220 kV), by far the largest part of the network is operated

by the five major DSOs in Spain. Equally, the distribution grids have a major role to play

in the transition toward a decarbonised energy market and a more flexible system.

Distributed generation (including solar PV) is expected to increase rapidly in the coming

years and DSOs will have a pivotal role in enabling self-consumption, smart grid services

and demand-side management, and in facilitating the emergence of aggregators and the

expansion of the electric vehicle charging network.

Nonetheless, contrary to REE’s transmission plan, the DSOs’ network investment plans,

which have a scope of three years, are not approved by the government. Reportedly, the

CNMC is consulted, but the role of the regulator seems to be limited merely to monitoring

that the planned investments do not exceed a maximum level so that the network tariffs

can be kept within bounds. Thus, there does not appear to exist a mechanism for the

government or the regulator to properly evaluate possible underinvestment or

overinvestment in the distribution grids. Such a mechanism could be useful with a view to

the rapidly growing number of facilities to be connected to distribution grids and the

reported lack of connection points to connect new renewables installations, notably solar

PV.

Recommendations

The government of Spain should:

 Raise the level of retail market competition by gradually removing regulated prices and

raising consumer awareness, including through consumer campaigns and facilitating

price comparisons.

 Consider adapting its policy for vulnerable consumers by combating energy poverty in

a more efficient manner through social welfare measures and support for energy

efficiency programmes such as the insulation of homes.

 Reinforce efforts to create more flexibility in the electricity market and to ensure proper

price signals for investments in generation, through increased interconnectivity,

continued integration of regional markets, and the development of demand-side

response and storage.

 Given current overcapacity, reconsider the option of introducing a capacity mechanism

to address adequacy concerns, yet closely monitor dispatchable generation capacity

to safeguard its role in the future renewables-based electricity system.

 Create a mechanism for appropriate assessments of distribution network plans to

ensure that distribution grids can accommodate distributed energy resources and

higher shares of variable renewable energy in line with the NECP’s targets.

7. ELECTRICITY

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References

EC (European Commission) (2020), Integrated National Energy and Climate Plan

2021-2030, https://ec.europa.eu/energy/sites/ener/files/documents/es_final_necp_main_en.

pdf.

IEA (International Energy Agency) (2021a), “World energy balances”, IEA World Energy

Statistics and Balances (database), www.iea.org/statistics.

IEA (2021b), Energy Prices and Taxes 2019 (database), www.iea.org/statistics.

REE (Red Eléctrica de España) (2021), "Map of current international electricity

interconnections", Strengthening interconnections, Grupo Red Eléctrica, Madrid,

www.ree.es/en/red21/strengthening-interconnections

139

ENERGY SECURITY

8. Nuclear

Key data (2019)

Number of operating rea

ctors: 7 reactors

Installed capacity:

7.1 GW (net capacity)

Electricity generation:

58.4 TWh

Share of nuclear:

21.5% of the total electricity generation

Overview

Spain has seven operating light water reactors, representing an installed net capacity of

7.1 gigawatts (GW) in total, which in 2019 provided 58.4 terawatt hours (TWh), or 21.5%,

of total electricity generation. Nuclear power plants (NPPs) contribute to decarbonising the

electricity system, and in Spain they accounted for the largest share (approximately 35%)

of low-carbon electricity in 2019, closely followed by wind.

Spain’s National Energy and Climate Plan 2021-2030 (NECP) submitted to the European

Commission foresees a sequential reduction of the country’s nuclear power capacity from

2027 to 2035. According to this plan, nuclear generation capacity will be reduced to around

3.2 GW by 2030 and to 0 by 2035.

As of 2020, three NPPs in Spain have been permanently shut down: Vandellos 1 in 1990,

Jose Cabrera in 2006 and Santa Maria de Garona in 2012. Two of them are being

decommissioned by Enresa, a state-owned company, and Santa Maria de Garona is now

under pre-dismantling works by the operation licensee before moving to decommissioning

by Enresa.

In Spain, state-owned Enresa is responsible for the management of radioactive waste,

including spent nuclear fuel (SNF) as well as the decommissioning of nuclear facilities. All

low- and intermediate-level waste (LILW) is managed and disposed of in El Cabril disposal

facility. It is expected that additional capacity for LILW disposal will be required by 2028.

Radioactive waste that cannot be managed as LILW and SNF are categorised as

high-level waste (HLW), to be disposed of in a deep geological repository (DGR) in the

future. A centralised storage facility (CSF) as temporary storage for SNF was proposed

in 2014, but the licensing process has been suspended since 2018. SNF is currently stored

in the plant pools or dry cask storage at each plant site.

8. NUCLEAR

140

Nuclear policy

The development of nuclear power in Spain began in the mid-1960s, with three small

reactors of different designs, none of which is currently in operation. The bulk of existing

nuclear capacity was started in the 1970s and came into commercial operation in the

1980s. Following a 1983 moratorium, confirmed in 1994, the plants under construction at

that time were abandoned, and no new nuclear reactors have been built in Spain since.

Figure 8.1 Final shutdown schedule of nuclear power plants in Spain according to

the NECP

Note: MW

= megawatt electrical.

Source: Government of Spain’s response to the IEA questionnaire.

In 2020, the Spanish government submitted its NECP to the European Commission, which

established the expectations for the evolution of nuclear energy’s contribution to the

energy mix in Spain. It foresees an orderly final shutdown of Spanish NPPs within the

2027-35 time frame. According to the NECP, the current nuclear generation capacity of

7.1 GW will fall to 3.0 GW by 2030, and to 0 by 2035 (Figure 8.1). Based on the draft

NECP, in March 2019, the owners of Spain’s NPPs and Enresa signed a protocol of

intentions specifying a final shutdown schedule for the NPPs.

1 000

2 000

3 000

4 000

5 000

6 000

7 000

8 000

2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

Nuclear installed capacity (MWe, net)

Today

ALMARAZ-1 (1 011 MW)

ALMARAZ-2 (1 006 MW)

ASCO-1 (995 MW)

COFRENTES

(939 MW)

ASCO-2

(997 MW)

VANDELLOS-2

(1 011 MW)

TRILLO (1 003 MW)

8. NUCLEAR

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ENERGY SECURITY

Regulatory framework

Figure 8.2 Institutional structure of nuclear energy in Spain

Sources: Government of Spain during IEA visit; IAEA (2018), Country Nuclear Power Profiles: Spain,

https://cnpp.iaea.org/countryprofiles/Spain/Spain.htm

The Ministry for the Ecological Transition and the Demographic Challenge (MITERD) is in

charge of nuclear energy and radioactive waste management policies. It is responsible for

issuing operating licences for nuclear facilities, subject to mandatory reports from the

Spanish nuclear safety authorities, submitting regulatory proposals for legislation

development, adopting provisions to implement current regulations and applying the

disciplinary regime with regard to nuclear energy. The government is also responsible for

defining the radioactive waste management policy, including SNF, and monitoring

compliance with international commitments in the field of nuclear energy.

The Nuclear Safety Council (CSN) is legally and financially independent from the State

General Administration. It has a role of ensuring nuclear safety and radiation protection of

all nuclear facilities in Spain. It submits reports to MITERD on issuing and renewing

licences for the operation of plants and other facilities handling radioactive material. These

reports are binding with specific safety requirements. The CSN may suspend the operation

of facilities for safety reasons and initiate procedures to impose sanctions on operators.

ENUSA Industrias Avanzadas, S.A., S.M.E. (ENUSA) and Empresa Nacional de Residuos

Radiactivos, S.A., S.M.E. (Enresa) are state-owned companies responsible for the front-

and back-end activities of the nuclear fuel cycle, respectively. ENUSA is in charge of

procurement of enriched uranium and nuclear fuel fabrication while Enresa is responsible

for nuclear decommissioning, management, and disposal of radioactive waste and SNF.

Regulatory body

PARLIAMENT

Nuclear Safety Council

(CSN)

GOVERNMENT

Ministry for the Ecological

Transition and the Demographic

Challenge (MITERD)

Ministry of Finance

Ministry of Science

and Innovation

Secretary of State for

Energy

General Directorate for

Energy Policy and Mines

Subdirectorate General

for Nuclear Energy

Secretary of State for

Environment

State Society of

Industrial Participation

(SEPI)

Centre for Energy-

Related Environmental

and Technological

Research (CIEMAT)

ENUSA

Enresa

Nuclear and radioactive facilities

Enresa’s spent fuel and radioactive waste

storage and disposal facilities

Regulatory authority

Radioactive waste

management policy (GRWP)

60%

40%

20%

80%

Regulatory facilities

Licensing, regulation, supervision, enforcement…

8. NUCLEAR

142

Nuclear power plant operation

As of 2020, there are seven reactors operating in Spain, all of them privately owned. Their

cumulative net generation capacity is 7.1 GW, providing around 21% of total electricity

generation in Spain in 2019. Their operational lifetimes are over 30 years, with an average

of 35.5 years (Table 8.1). They have maintained remarkable capacity factors, around 90%,

in the last decade (Figure 8.3).

Table 8.1 Operating nuclear power plants in Spain in 2020

Reactor

unit

Type

Net

capacity

(MW

)

Commercial

operation

Years of

operation

Licensed to

Shutdown

scheduled

in NECP

Owner

ALMARAZ

-1

PWR

1 011

Sept. 1983

Nov. 2027

Iberdrola

(52.7%)

Endesa (36%)

Naturgy (11.3%)

ALMARAZ

-2

PWR

1 006

July 1984

Oct. 2028

Iberdrola

(52.7%)

Endesa (36%)

Naturgy (11.3%)

ASCO-1

PWR

995

Dec. 1984

Sept. 2021

Oct. 2030

Endesa

ASCO-2

PWR

997

March 1986

Sept. 2021

Sept. 2032

Endesa (85%)

Iberdrola (15%)

COFRENT

BWR

1 064

March 1985

March 2021

Nov. 2030

Iberdrola

TRILLO

PWR

1 003

Aug. 1988

Nov. 2024

May 2035

Iberdrola (49%)

Naturgy (34.5%)

Hidrocantábrico

(15.5%)

Endesa (1%)

VANDELL

OS-2

PWR

1 045

March 1988

July 2030

Feb. 2035

Endesa (72%)

Iberdrola (28%)

Notes: MW

= megawatt electrical. PWR = pressurised water reactor. BWR = boiling water reactor.

Sources: IAEA (2020), Power Reactor Information System (PRIS) (database), https://pris.iaea.org/PRIS/home.aspx

;

WNA (2020), Country Profiles: Nuclear Power in Spain, www.world-nuclear.org/information-library/country-

profiles/countries-o-s/spain.aspx.

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ENERGY SECURITY

Figure 8.3 Capacity factors of nuclear power plants in Spain and the world

Source: IAEA (2020), Power Reactor Information System (PRIS) (database), https://pris.iaea.org/PRIS/home.aspx.

While the NECP and the subsequent protocol set the upper limit of operational years, the

actual operational lifetime of NPPs is still subject to nuclear safety regulations as well as

to their owners’ decisions for investment. Operating licences for Spanish NPPs are granted

for a ten-year period by MITERD, following a binding report on nuclear and radiological

safety from the CSN. Application for the renewal of an operating licence must include the

results of the periodic safety review, and, for applications beyond 40 years of operation,

an integrated ageing assessment and management plan with appropriate ageing analysis

has to also be included to ensure that the system and equipment can be operated safely

beyond 40 years. Therefore, the seven Spanish reactors have to renew their operation

licences beyond 40 years of operation in order to continue operation until their final

shutdown year outlined in the NECP. Two of these licences (corresponding to three

reactors) have already been granted.

On the other hand, nuclear operators claim that the market environment for NPPs is not

favourable due to high taxation on nuclear generation and low electricity market prices.

According to a calculation by Endesa, current nuclear generation costs are well over

EUR 50/MWh, around 40% of which are taxes and fees for radioactive waste management

(Table 8.2). The company claims to operate NPPs with economic losses under the

prevailing MIBEL (Iberian power market or Mercado Ibérico de Electricidad) market price,

which has dropped due to the impacts of the COVID-19 pandemic. Indeed, average MIBEL

prices were around EUR 40/MWh or less during the third quarter of 2020 (AleaSoft, 2020),

much lower than the nuclear generation cost.

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2010 2011

2012 2013 2014 2015

2016 2017 2018 2019

Spain

World

Capacity factor (weighted average)

8. NUCLEAR

144

Table 8.2 The cost structure of nuclear power generation in Endesa

EUR/MWh

Variable operating cost

Fuel expenses

Electricity purchases and generation tolls

Nuclear waste fees*

14.0

5.3

0.7

8.0

Fixed operating costs and recurring costs

Fixed operating costs

Investments

17.6

13.1

4.5

Tax Law 15/2012 and autonomous communities

Electricity generation tax (7%)*

Nuclear fuel tax*

Autonomous communities’ nuclear tax

13.4

3.2

5.2

5.0

Capital cost 11.1

Total generation cost

(Taxes and nuclear waste fees)

56.1

(21.4)

* Taxes or fees for nuclear waste management.

Note: MWh = megawatt hour.

Source: Endesa during IDR visit.

Nuclear fuel supply

The state-owned company ENUSA is in charge of nuclear fuel supply for NPPs in Spain,

which includes the procurement of enriched uranium and nuclear fuel fabrication. No

facilities are operating in Spain for mining, milling, conversion and enrichment of uranium.

ENUSA imports enriched uranium for nuclear fuel from several countries, including the

Russian Federation, Uzbekistan, Niger, Canada, Namibia, Kazakhstan and Australia. The

company operates a nuclear fuel fabrication facility located in Juzbado. This facility, while

producing all nuclear fuel assemblies necessary for NPPs in Spain, except the Trillo NPP,

also manufactures fuel assemblies for exports to other countries such as Belgium, France

and Germany. Exports accounted for 50% of total production in 2019.

Decommissioning and radioactive waste management

The policy for managing radioactive waste, including SNF, and for decommissioning

nuclear facilities, including NPPs, is established in the General Radioactive Waste Plan

(GRWP). The GRWP is intended to address not only the strategies, necessary actions and

technical solutions to be developed in the short, medium and long terms for

decommissioning nuclear facilities and managing radioactive waste, but also the economic

and financial measures necessary to carry them out. Enresa is responsible for drafting and

reviewing the GRWP every four years or upon request of MITERD, and for submitting it to

MITERD, who reviews a revision of the GRWP and submits a proposal for its approval to

the Council of Ministers. As a part of the approval procedure, MITERD conducts a

consultation of the general public and relevant stakeholders, including the autonomous

8. NUCLEAR

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ENERGY SECURITY

communities. The CSN provides a report on the nuclear safety and radiation protection

aspects. The approved GRWP is reported to the Spanish parliament. The approval

process, until the plan is approved by the Council of Ministers, may take about two years.

The seventh revision of the GRWP was proposed in March 2020 and reflected the

sequential final shutdown schedule of NPPs stated in the aforementioned protocol, as well

as updates of necessary actions and technical solutions.

While Enresa is responsible for decommissioning and radioactive waste management

according to the GRWP, its activities and performance are monitored and controlled by

the Secretary of State for Energy of MITERD. To that end, Enresa periodically submits

reports to MITERD that include technical and economic aspects of the activities it has

carried out, issues related to budgets, updated economic and financial studies on the costs

of the activities set in the GRWP, and an evaluation of the adequacy of the existing

financial mechanism for the GRWP.

Decommissioning

As of 2020, three NPPs have been shut down in Spain; two of them, Vandellos-1 and

Jose Cabrera, are being decommissioned by Enresa. The third plant, Santa Maria de

Garona, is now under pre-dismantling works by the operation licensee before moving to

decommissioning by Enresa.

Table 8.3 Status of the decommissioning process of nuclear power plants in

Spain, 2020

Reactor unit

Type

Net

capacity

(MW

)

Shut-down

Decommissioning strategy

Current phase

Vandellos-1

GCR

July 1990

Deferred dismantling, including

partial dismantling. The remaining

radiological areas have been

safely enclosed (SAFSTOR).

Dormancy period.

The final dismantling

phase will start

around 2028.

Jose

Cabrera

PWR

141

April 2006

Immediate dismantling and

removal of all radioactive

materials.

Final dismantling.

Santa Maria

de Garona

BWR

446

Aug. 2017

–

Pre-dismantling.

Notes: MW

= megawatt electrical. GCR = gas cooled reactor. PWR = pressurised water reactor. BWR = boiling

water reactor.

Sources: IAEA (2020), Power Reactor Information System (PRIS) (database), https://pris.iaea.org/PRIS/home.aspx

;

Enresa website: www.enresa.es/eng.

Once an NPP is shut down permanently, the operating licensee of the NPP is required to

condition the radioactive waste generated during its operation and to discharge the SNF

from the reactor and the storage pools or, alternatively, to have an SNF management plan

approved by MITERD, upon a report by the CSN. The decommissioning licence is issued

by MITERD upon a report by the CSN. The licence is then transferred to Enresa to proceed

with the decommissioning of the NPP. The decommissioning authorisation procedure

requires an environmental impact assessment and a public consultation to be carried out.

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Radioactive waste management

In Spain, radioactive waste is classified into three groups: low- and intermediate-level

waste, special waste (SW) and high-level waste. LILW represents radioactive waste with

a half-life under 30 years and minimal content in long-lived radioisotopes. This group

includes very low-level waste (VLLW) as a subgroup. SW, waste that cannot be disposed

of as LILW at El Cabril due to its higher radioactivity, will be managed and disposed of at

the future DGR. HLW contains radioisotopes with over a 30-year half-life, including SNF.

Low- and intermediate-level waste

All LILW and VLLW generated from nuclear facilities in Spain are to be disposed of at the

El Cabril facility by Enresa. As of the end of 2018, 33 602 cubic metres (m

) of LILW were

disposed of in this facility, representing 77.2% of its capacity of around 45 000 m

(Enresa,

2018; Zuloaga, 2006). VLLW is to be disposed of in four dedicated vaults, whose total

capacity will be about 130 000 m

. Currently, two of them are operating, storing 15 491 m

of VLLW at the end of 2018 (Ibid.).

According to Enresa’s latest forecasts, the total amount of radioactive waste to be

disposed of at this facility will be around 96 500 m

of LILW and 123 500 m

VLLW.

Additional capacity for the disposal of LILW will be needed by around 2028 to avoid

impacts on the operation and decommissioning of NPPs. In 2018, Enresa started

engineering works for the construction and licensing of the required capacity expansion,

so that it can be completed in due time.

High-level and special waste and spent nuclear fuel

In Spain, SNF is to be disposed of as HLW. In operating NPPs, SNF is temporarily stored in

on-site storage pools, or in dry casks in the individual storage facilities built at the plant site.

As of September 2020, among the five NPP sites, three had individual storage facilities in

operation and one more was under construction. SNF is to be transferred to the CSF in the

future, where it will be stored for about 60 years until the DGR becomes available.

Decommissioning waste with relatively high levels of radioactivity is classified as SW.

The CSF is expected to have sufficient capacity to accommodate all SNF and SW generated

from the operation and decommissioning of Spanish NPPs. The facility, as a strategic option

foreseen in the 7th GRWP, is targeted to be put into service in 2028. The site selection

process for the CSF was completed and the designation of the municipality of Villar de Canas

was approved by the Council of Ministers in 2011. Enresa submitted to the then Ministry of

Industry, Energy and Tourism the application for the preliminary and construction

authorisations in January 2014. Additionally, in August 2013, Enresa submitted to the then

Ministry of Agriculture, Food and Environment the application to initiate the required

environmental impact assessment for the project. The CSN issued a favourable report for

preliminary authorisation in July 2015. However, in 2018, the Secretary of State for Energy

requested that the CSN put on hold issuance of the mandatory report of the regulatory body

regarding the construction authorisation. That request was based on the need for a more

detailed assessment of the situation, the pending processing and approval of a new revision

of the GRWP, and on new factors that could have changed in the time that had elapsed

since January 2014. Additionally, the granting of the environmental impact assessment,

whose issuance affects the preliminary authorisation, was also put on hold. The

environmental documentation that accompanies the draft 7th GRWP considers and

analyses multiple distributed storage facilities as technically and environmentally viable and

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ENERGY SECURITY

rational alternatives to the CSF. The government is expected to take a decision on the

strategy for SNF storage during the approval process of the proposed GRWP.

Regarding the DGR, the site selection process has not yet started. The draft of the 7th

GRWP establishes a tentative programme for the availability of the facility in order to attain

the objective of beginning its operation in 2073 (Table 8.4). This tentative programme

focuses on developing the technological capabilities and social acceptance necessary to

guide and implement the DGR, and proposes to start the site selection process around 2030.

This programme will be further analysed during the approval process of the 7th GRWP.

Table 8.4 Phases to implement the deep geological repository proposed in the

draft 7th GRWP

Phase

Activity

Phase 1 (until 2024):

Updating of knowledge

• Enresa will prepare a report including:

 the updated status of the information and capacities available

 a proposal for the site designation process



the basic information for the planning process.

Phase 2 (3 years):

Assessment of the report

• The government will analyse the report and guide the following

phases based on the assessment.

• The generic project for the deep geological repository (DGR) will be

evaluated by the Nuclear Safety Council (CSN).

•

The R&D plans and programmes will be developed.

Phase 3 (4 years): Site

selection process

• The procedure for the selection of the site will be prepared and

implemented.

• Some candidate sites will be identified.

• A proposal for basic design criteria for the DGR and the preliminary

site characterisation plan will be submitted to the CSN for

evaluation.

Phase 4 (7 years): Analysis

of candidate sites and

selection of definitive

candidate

• Preliminary works will be undertaken to characterise the different

candidate sites, applying near surface technologies.

• The CSN will evaluate the detailed plan for the characterisation of

the site.

• The underground laboratory and surface support facilities project,

and the environmental evaluation of the project will start.

Phase 5 (20 years):

Characterisation of site and

verification of suitability

• An underground laboratory will be constructed and detailed

characterisation will be carried out.

• The detailed design of the DGR and the corresponding safety and

environmental impact studies will be elaborated.

• The documents for site and the construction authorisation will be

prepared and submitted, and authorisations will be granted.

Phase 6 (12 years): Licensing

and construction

• The construction of the DGR will start.

• The documents for the operating authorisation will be prepared and

submitted, and the authorisation will be granted.

• Long-term testing data collection will start.

• A demonstration pilot facility for verification of the facility's

engineering barrier system will be built.

Phase 7: Initial operation and

tests

• The spent nuclear fuel and high-level waste will begin to be stored in

the DGR for a first stage of nuclear tests.

Phase 8: Normal operation

• The DGR will start normal operation.

Notes: DGR = deep geological repository. CSN = Nuclear Safety Council.

Source: Government of Spain’s response to the IEA questionnaire.

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Funding for decommissioning and radioactive waste

management

The Spanish scheme for the financing of decommissioning and radioactive waste

management is based on the polluter-pays principle (EC, 2019). To finance the costs for

decommissioning and radioactive waste management by Enresa, licence holders of

nuclear facilities are required to pay fees into the dedicated “Fund for the Financing of the

Activities included in the General Radioactive Waste Plan” (GRWP Fund), which is held

and managed by Enresa (Figure 8.4).

Figure 8.4 The funding system for decommissioning of nuclear facilities and

radioactive waste management

Source: MITERD (2020), Country Case Study Spain.

These fees finance both present and future costs according to the cost estimations in the

GRWP. The decommissioning and radioactive waste management of nuclear facilities that

were operational on 1 January 2010 are financed by a fee from licensees, which is

collected exclusively during the operation of the plants. A small share of the revenues

comes from a part of the electricity tariff to cover the costs associated with the NPPs that

were permanently shut down before 1 January 2010 or those that were not foreseen during

the operation of the NPPs. Fees must be covered by the license holders throughout the

entire operational lifetime of their facilities. If they decide on early final shutdown of their

facilities, they are also liable to pay extra fees. Enresa determines the amounts that are

payable to the fund and annually reports them to the Spanish government which, in turn,

can adjust the unit rates by regulatory means so that the fund is sufficient. The supervision

and control of the transitory investments of the GRWP Fund are carried out by an

inter-ministerial Monitoring and Control Committee that is attached to MITERD.

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Research and development

In Spain, the Centre for Energy Related, Environmental and Technological Research

(CIEMAT), Enresa, and the CSN are the main entities involved in nuclear research and

development (R&D) activities. CIEMAT focuses on nuclear safety, nuclear innovation and

radioactive waste management, as well as nuclear fusion technology (IAEA, 2018). Enresa

carries out R&D activities related to decommissioning of nuclear facilities and radioactive

waste management based on its multiannual R&D Plan (NEA, 2018). The current

8th revision of Enresa’s R&D Plan for 2019-23 sets up five research areas: 1) waste

technology and know-how; 2) technology for treatment, conditioning and dismantling

processes; 3) confinement materials and systems; 4) safety assessment, performance

assessment, radiological protection and associated modelling; and 5) cross-cutting

activities (knowledge management and co-ordination). The CSN carries out R&D activities

according to its R&D Plan for 2016-20 (CSN, 2016). The plan focuses on nuclear safety

and radiation protection and sets a number of projects to be undertaken in collaboration

with different national and international organisations, such as universities, public and

private companies, and government agencies.

In addition to the activities undertaken by these entities, there are two major platforms for

nuclear R&D. The Nuclear Fission Energy Technology Platform (CEIDEN) aims to

co-ordinate the different national programmes and plans for nuclear R&D and to foster the

participation of Spanish companies and institutions in international R&D activities

(CEIDEN, n.d.). The programmes involved in CEIDEN are: 1) the Accident Tolerant Fuel

Group; 2) the Socio-technical Research Working Group; 3) the Knowledge Management

and Training Group (KEEP+); 4) the Materials Group; and 5) the Jules Horowitz Reactor

Project. The other platform, the National Platform of R&D on Radiological Protection

(PEPRI), aims to foster R&D activities in the field of radiation protection and to co-ordinate

Spain’s participation in international R&D programmes in this domain, including Horizon

2020 (PEPRI, n.d.).

Assessment

Over the past half-century, Spain has developed a well-integrated and efficient nuclear

infrastructure including seven operating NPPs, a fuel manufacturing facility, solutions for

decommissioning of nuclear facilities and the management of radioactive waste and spent

nuclear fuel, and efficient regulatory institutions. The performance of operating NPPs is

excellent, maintaining high-capacity factors of around 90% for the last decade. Currently,

nuclear energy produces about 20% of Spain’s total electricity, contributing to the security

of supply, reduction of greenhouse gas emissions and diversification of energy sources.

The NECP foresees a sequential shutdown of the Spanish nuclear power capacity from

2027 to 2035. According to this plan, nuclear generation capacity will be reduced to around

3.2 GW by 2030 and to 0 by 2035. This orderly final shutdown was agreed in 2019 by the

owners of Spanish NPPs and Enresa. The operational period of each NPP is still subject

to compliance with the limits and conditions on nuclear safety imposed by the CSN,

including approval of their Integrated Ageing Assessment and Management Plan for

operation beyond 40 years, as well as the licensee’s decision to invest in such a plan for

continuing operation. According to some of the licensees, they currently operate their

NPPs at a loss due to high taxation on nuclear generation and low electricity market prices,

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so they might opt to exit the market sooner; this would imply changes in the electricity mix.

There is also concern for the large impact on employment of the highly skilled workforce

by the final shutdown of nuclear power plants. However, no concrete measures have been

put in place for transitional support so far.

Spain has developed a well-integrated scheme for decommissioning of nuclear facilities

and radioactive waste management including SNF under the clear and predominant

responsibility of the government. The GRWP, established after a comprehensive process

including public consultation, safety review by the CSN and approval by the Council of

Ministers, provides the reference framework for national strategies and actions for

decommissioning and radioactive waste management. According to the GRWP, the

state-owned company Enresa carries out activities, and MITERD oversees both technical

and financial activities and the performance of Enresa. Enresa is expected to

decommission ten NPPs in Spain over the next few decades. This could give the company

a competitive advantage in the NPP decommissioning business in other countries, through

economies of scale and knowledge centralisation. Currently, there is no consideration for

Enresa to expand its decommissioning business to other countries, except for possible

technical co-operation under international organisations such as the International Atomic

Energy Agency, the Nuclear Energy Agency and the European Atomic Energy Community.

Spain has a well-structured centralised funding scheme in place to finance costs for

decommissioning of nuclear facilities and management of radioactive waste. There is a

single external joint fund to cover the costs (the GRWP Fund). The GRWP Fund is

regulated by law, and held and managed by Enresa. The management of the fund is

supervised and controlled by an inter-ministerial Monitoring and Control Committee

attached to MITERD. Fees for the fund are to be satisfied by the license holders throughout

the entire operational lifetime of their facilities and can be revised by means of royal

decree. This scheme gives Spain an advantage, the ability to closely align legislative

projects with long-term decommissioning and radioactive waste management strategies,

while holding license holders financially responsible for the costs. On the other hand, the

effectiveness of this scheme requires a realistic and comprehensive estimation of future

costs. Otherwise, it could impose residual or unforeseen financial responsibilities on the

state, and thus ultimately on taxpayers. Currently, the regulatory process for developing

the centralised storage facility for SNF is suspended, and the site selection process for the

DGR has not yet been established. The government contends that the delay in CSF

implementation would not affect NPP operation and decommissioning, as individual

storage facilities at each site will have sufficient capacity to accommodate the SNF and

SW that will be generated in the future. However, the delay in implementing the CSF and

the DGR could impose additional costs on decommissioning and radioactive waste

management in the future. The existing funding scheme includes a mechanism to collect

fees from a percentage of the electricity tariff, which currently aims to finance the costs

associated with the NPPs that were permanently shut down prior to 1 January 2010 and

those costs that were not foreseen during the operation of the NPPs. While this mechanism

could be used to address uncertainties in the estimation of future costs, it could amount to

transferring these costs to the future generation of electricity consumers.

Spain has developed a wide range of nuclear technological competencies since the 1960s,

from nuclear power plant construction and operation or nuclear fuel fabrication to

radioactive waste and SNF management. Its current national nuclear R&D activities focus

on radioactive waste management and decommissioning, in line with its policy to phase

out nuclear by 2035. On the other hand, nuclear technology is considered to have great

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ENERGY SECURITY

potential to contribute to decarbonisation of not only the electricity system, but also

hard-to-abate sectors, such as manufacturing and transport, through high-temperature

heat supply and hydrogen production (NEA, 2020). Given the great challenge for achieving

carbon neutrality in 2050, the high level of nuclear technology infrastructure and skilled

professionals in Spain could be utilised more effectively for developing and implementing

long-term energy strategies.

Recommendations

The government of Spain should:

 Closely monitor the financial situation of nuclear power plants to prevent unforeseen

or sudden final shutdown that could significantly deteriorate the security of electricity

supply.

 Pursue timely implementation of the back-end strategy, including the centralised

storage facility and the deep geological reporsitory, to avoid unnecessary cost

escalation for decommissioning of NPPs and radioactive waste management,

including final waste disposal.

 Develop projects that could enable the effective preservation and transfer of

knowledge and expertise using current technical infrastructure and highly skilled

workers as well as the institutional advantages of Enresa in the NPP decommissioning

business.

 Consider the usefulness of nuclear energy, including for non-electricity applications,

for diversifying technical options to achieve long-term carbon neutrality by 2050.

References

AleaSoft (2020), Report of the European Energy Market Prices for the Month of October

2020, AleaSoft, 3 November, https://aleasoft.com/report-european-energy-market-prices-

month-october-2020.

CEIDEN (Plataforma Tecnológica de Energía Nuclear de Fisión) (n.d.), CEIDEN website,

https://ceiden.com.

CSN (Nuclear Safety Council) (2016), Plan de Investigación y Desarrollo del Consejo de

Seguridad Nuclear (2016-2020),

www.csn.es/en/i-d/plan-i-d.

8. NUCLEAR

152

EC (European Comission) (2019), Study on the Risk Profile of the Funds Allocated to

Finance the Back-End Activities of the Nuclear Fuel Cycle in the EU,

https://op.europa.eu/en/publication-detail/-/publication/3a94a52a-ec36-11e9-9c4e-

01aa75ed71a1.

Enresa (n.d.), Enresa website, www.enresa.es/eng.

Enresa (2018), Annual Report 2018, www.enresa.es/eng/index/about-

enresa/publications/category/9-institutional?download=109:annual-report-2018.

IAEA (International Atomic Energy Agency) (2020), Power Reactor Information System

(PRIS) (database), https://pris.iaea.org/PRIS/home.aspx.

IAEA (2018), Country Nuclear Power Profiles: Spain,

https://cnpp.iaea.org/countryprofiles/Spain/Spain.htm.

MITERD (Ministry for the Ecological Transition and the Demographic Challenge) (2020),

Country Case Study Spain, presentation at the NEA Workshop: Adequacy of Funding for

Decommissioning and Radioactive Waste Management, 18 September.

NEA (Nuclear Energy Agency) (2020), 03 Reduce: Nuclear. – Guide to the Circular Carbon

Economy, www.cceguide.org/guide.

NEA (2018), “Radioactive Waste Management and Decommissioning in Spain”, OECD

Publishing, Paris, https://www.oecd-nea.org/jcms/pl_33777/spain-report.

PEPRI (Plataforma Nacional de I+D en Protección Radiológica) (n.d.), PEPRI website,

www.pepri.es.

WNA (World Nuclear Association) (2020), Nulcear Power in Spain, www.world-

nuclear.org/information-library/country-profiles/countries-o-s/spain.aspx.

Zuloaga, P. (2006), New Developments in Low Level Radioactive Waste Management in

Spain, Enresa, Madrid,

https://inis.iaea.org/collection/NCLCollectionStore/_Public/38/099/38099795.pdf.

153

ENERGY SECURITY

9. Coal

Key data

(2019)

Coal net imports

: 7.2 Mt/4.5 Mtoe (5.5 Mtoe imports, 1.0 Mtoe exports), -50% since 2009

Share of coal:

4% of total energy supply and 5% of electricity generation

Consumption by sector:

4.9 Mtoe (power and heat generation 70.2%, other industry 26.8%,

energy

19.3%, services 1.6%, residential 1.4%)

Overview

Following the closure of all its coal mines, Spain in 2019 reported for the first time no

domestic coal production. Coal was the fifth-largest primary energy source in Spain,

representing 4% of total energy supply (TES) in 2019 after oil, natural gas, renewables

and nuclear (Figure 9.1). The share of coal in electricity generation significantly decreased

between 2000 and 2010 due to an increased share of renewable energy sources. Later,

between 2010 and 2018, coal for power production fluctuated between 9% and 19% of

total electricity generation, then dropped significantly to 5% in 2019. Coal’s share in total

final consumption (TFC) slightly decreased, from 1.6% in 2000 to 0.6% in 2019. Net

imports halved in the decade between 2009 and 2019.

Figure 9.1 Share of coal in different energy supplies in Spain, 2000-19

Between 2000 and 2019, the share of coal significantly decreased from 25% to 0% of

domestic energy production and from 37% to 5% of electricity generation.

Notes: TES = total energy supply. TFC = total final consumption.

Source: IEA (2021), IEA World Energy Statistics and Balances (database), www.iea.org/statistics

10%

15%

20%

25%

30%

35%

40%

Domestic energy

production

TES

Electricity generation

TFC

Share of coal

2000

2005

2010

2015

2019

9. COAL

154

The government of Spain plans to close all coal-fired power plants by 2030 in order to

accelerate the energy transition towards a low-carbon economy. Coal’s declining share in

energy supply is expected to continue. As a result, imports will also decline rapidly.

Depending on market circumstances, such as the price for CO

emissions allowances

under the EU Emissions Trading System (ETS), coal-fired power generation in Spain might

end well before 2030.

Supply and demand

In 2019, Spain’s coal supply amounted to 4.5 million tonnes of oil equivalent (Mtoe), 90%

of which was steam coal and 10% coking coal (Figure 9.2). Total coal supply dropped by

77% between 2000 and 2019, in line with decreasing domestic demand. Domestic coal

production has steadily decreased from 7.9 Mtoe in 2000 to 0 in 2019, as a result of the

closure of domestic coal mines. All coal supply was imported in 2019, but coal imports

have also decreased, from 13 Mtoe to 4.5 Mtoe between 2000 and 2019.

Spain imported 8.5 million tonnes (Mt) of steam (90%) and coking (10%) coal, and

exported 1.5 Mt of steam coal in 2019. Coal was mainly imported from Indonesia (27%),

the Russian Federation (32%), Colombia (13%), Australia (10%) and the United States

(8%) (Figure 9.3). Spain exported coal, mostly to neighbouring European countries,

including Italy, Portugal and the United Kingdom.

Figure 9.2 Spain’s coal supply by source, 2000-19

Most coal in Spain is imported, as production stopped in 2019. In the last decade, and

especially in 2019, the total supply of coal significantly declined.

Notes: Mtoe = million tonnes of oil equivalent. TES = total energy supply.

Source: IEA (2021), IEA World Energy Statistics and Balances (database), www.iea.org/statistics

-5

Mtoe

Stock

changes

Imports

Production

Exports

TES

9. COAL

155

ENERGY SECURITY

Figure 9.3 Spain’s coal net imports by country, 2000-19

Indonesia, Russia and Colombia are the major coal importing countries to Spain, accounting

for 59% of the total in 2019.

Notes: Mt = million tonnes. Includes only hard coal.

Source: IEA (2021), IEA World Energy Statistics and Balances (database), www.iea.org/statistics

Total coal demand in Spain was 4.9 Mtoe in 2019, which is 77% lower than in 2000. Coal

consumption has fluctuated year-on-year, mostly depending on its use in electricity

generation (Figure 9.4). Between 2007 and 2010, coal demand for electricity generation

significantly decreased to around 6 Mtoe, to increase again in the following years, but still

remained at about half of demand in the first years of the century. Meanwhile, coal

consumption in other sectors has remained relatively stable over the last decade. In 2019,

70% of total coal consumption in Spain was used for power generation, followed by

industry (27%), other energy (19%), and minor shares for residential and services.

Figure 9.4 Coal consumption in Spain by sector, 2000-19

Coal used for power generation in 2019 accounted for 70% of the total, and has decreased

by 60% compared to 2000.

* Power generation includes a minor share of district heat production.

** Other energy includes energy use in transformation in coke ovens and blast furnaces.

*** Services/other includes commercial and public services.

Note: Mtoe = million tonnes of oil equivalent.

Source: IEA (2021), IEA World Energy Statistics and Balances (database), www.iea.org/statistics

Other

Australia

Colombia

Russian Federation

Indonesia

Mtoe

Power generation*

Industry*

Other energy**

Services/other***

Residential

9. COAL

156

Coal policy

Coal phase-out

As part of its climate change and energy transition agenda, Spain has a plan to phase out

the use of coal in its electricity sector. However, unlike in some countries that have

imposed specific mandates for the industry to shut down coal-fired generation capacity,

Spain expects that market conditions will drive coal closures.

The National Energy and Climate Plan (NECP) expects that up to 9 of Spain’s 15 coal-fired

power plants (as of 2019) will no longer be operational by 2021. Already, based on market

conditions and requirements under the EU Industrial Emissions Directive for large

combustion facilities, on 30 June 2020, 8 of Spain’s fully operational 14 coal-fired plants

with around 4.6 gigawatts (GW) of capacity shut down. Three more have asked for

permission to close in 2021 and another one is expected to close in 2022. Moreover, one

plant in Majorca only operates on a limited basis (around 500 hours annually after 2021).

By 2030, the government expects that coal-fired power plants will no longer be competitive

based on an EU EEmissions Trading System price of EUR 35/tonne, along with continued

cost reductions for renewables technologies and relatively low prices for natural gas. As

such, it expects coal to be fully phased out of the power sector by 2030.

Large-scale generation facilities need authorisation from the government before they can

be decommissioned. The approval procedures can be lengthy and numerous. In the time

it takes for the government to grant approval, companies need to maintain their power

plants and be prepared to start generation within a given time frame, adding to the costs

of decommissioning.

Currently, Spain does not have policies in place or under development to advance carbon

capture, utilisation and storage.

Coal subsidies

Over the last few decades, coal mining in Spain was directly subsidised as it was not

competitive with imported coal. However, the government gradually decreased subsidies

from EUR 314 million (EUR 37 per tonne) in 2010. In line with EU requirements, it stopped

them completely by the end of 2018. Consequently, domestic coal supply declined from

around 23 Mt in 2000, to 8 Mt in 2010, to 0 at present.

As such, neither coal mining nor coal-fired generation currently receive any subsidies in

Spain.

Transitional assistance

Based on the expected coal phase-out, the government plans to offer support measures

to affected regions to help them adjust to the transition.

The government has already announced the closure of coal mining operations and the

redirection of coal mining subsidies to restructuring coal mining regions. Royal Decree-

Law 25/2018 extended the closure plan for coal mining by two years, originally scheduled

for 31 December, 2018. However, most domestic mining has already been shut down.

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ENERGY SECURITY

As part of this effort, the government has released two action frameworks: the “Framework

for Action for Coal Mining and Mining Areas in the 2013-2018 Period” and the new

“Framework Agreement for a Fair Transition of Coal Mining and the Sustainable

Development of Mining Areas 2019-2027”. Different regulations have been published

under these action frameworks to regulate aid for coal mine closures, aid for exceptional

costs and aid to boost mining areas, as established in EU Directive 2010/787. The work is

spearheaded by the Just Transition Institute.

Addressing the detrimental impact of coal mine closures on labour markets is a focal point

of the frameworks. To this end, they include measures to promote the development of

projects that generate employment and support the construction of related infrastructures

while encouraging the hiring of unemployed workers as a result of the cessation of mining

activities.

Aid to promote new economic activities and/or the expansion of existing ones as

alternatives to coal mining may be carried out by granting incentives through:



business projects with investments greater than EUR 100 000 and job creation

commitments equal to or greater than three jobs



aid for small investment projects



aid for the alternative development of mining areas.

These grants are aimed at promoting the alternative development of mining districts

through the execution of infrastructure projects and restoration of areas degraded by

mining activity.

The development of infrastructure will be primarily directed to the following activities:



improvement, restoration, recovery and revaluation of dumps, degraded areas and spaces

affected by coal mining operations



improvement of equipment related to transformation and electrification centres, gas supply,

lighting, and hydraulic infrastructures



forest recovery and management of areas degraded by mining activities, as well as actions

related to atmospheric sanitation aimed at improving air quality, reducing noise levels and

the regeneration of wastewater treatment plants



provision and renovation of telecommunication lines, optimisation and energy

diversification with renewable energy supply in public buildings



creation and equipping of business incubators, technological development centres.

Aid corresponding to infrastructure and restoration projects amounts to around

EUR 125 million, and will be articulated in 103 collaboration agreements between the Just

Transition Institute and the autonomous communities.

Regionally, the relevant areas are those belonging to the autonomous communities of

Aragón, Principado de Asturias, Castilla y León and Castilla La Mancha.

Mine closures have not significantly impacted Spain’s supply of coal, as the coal that was

being used for thermal energy generation was already mostly sourced from imports.

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Assessment

In a dramatic change from history, and as part of its climate change and energy transition

agenda, Spain is closing down its coal mining sector and phasing out the use of coal in its

energy sector. However, unlike in some countries that have imposed specific mandates

for the industry to shut down coal-fired generation capacity, Spain expects regulations and

market conditions to drive the closure of the 14 coal-fired power plants (total capacity

around 10 GW) that were still in operation at the start of 2020.

Over the last decades, coal mining in Spain was directly subsidised as it was not

competitive with imported coal. However, the government gradually decreased subsidies,

and in line with EU requirements stopped them by the end of 2018 completely.

Consequently, domestic coal supply declined from around 46 Mt in 2000 to almost 0

in 2020. In 2019, Spain still imported 8.5 Mt of coal, but imports are also declining fast with

the closure of coal-fired power plants. Some 1.4 Mtoe of coal is used outside of the

electricity sector.

The government set up a programme to offer support measures to affected regions to help

them adjust to the transition. As part of this effort, it has released two action frameworks: the

“Framework for Action for Coal Mining and Mining Areas in the 2013-2018 Period” (extended

for two years to the end of 2020) and the “Framework Agreement for a Fair Transition of

Coal Mining and the Sustainable Development of Mining Areas 2019-2027”. Different

measures were taken under these frameworks to provide aid for coal mine closures; aid for

exceptional costs; and aid to boost employment in the mining areas of Aragón, Asturias,

Castilla y León and Castilla La Mancha. All domestic coal mines have already shut down.

Since 30 June 2020, coal-fired plants have to comply with EU environmental regulations

for emissions of large industrial installations and power plants. For many of the coal-fired

power plants in Spain, such compliance is not economically feasible, and as a

consequence, on 30 June 2020, eight plants with around 4.6 GW of capacity shut down

and four more, representing 3.1 GW, announced closure in 2021 or 2022. According to

the NECP, by 2030, the government expects that coal-fired power plants will no longer be

competitive based on an EU ETS price of EUR 35/tonne, along with continued cost

reductions for renewables technologies and relatively low prices for natural gas. As such,

the government expects all coal plants to be closed by 2030. In practice, with falling

electricity demand due to COVID-19, low natural gas prices and costs for renewable

generation falling rapidly, this is likely to happen much earlier. Coal-fired generation is

already declining fast: its share in total generation was 14% in 2018, 5% in 2019, and

in 2020 it is expected to be around 2%.

Large-scale generation facilities need approval from the government before they can be

decommissioned. Currently the approval procedures are lengthy and numerous, though

essential as part of the regulatory framework to ensure security of energy supply. As long

as no approval is granted by the government, companies need to maintain their facilities

in a state that allows them to start generation within a given time frame. This situation of

readiness adds to the decommissioning costs of the power plants that were already

loss-making to their companies.

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Recommendation

The government of Spain should:

 Ensure a clear and efficient process for granting generators permission to

decommission their coal-fired generation plants.

References

IEA (International Energy Agency) (2021), “World energy statistics”, IEA Energy Statistics

and Balances (database), www.iea.org/statistics.

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10. Natural gas

Key data

(2019)

Domestic p

roduction: 0.1 bcm, +867% since 2009

Net imports:

36.1 bcm (37.2 bcm imports, 1.2 bcm exports)

Share of gas:

0% of domestic energy production, 25% of total energy supply,

31% of

electricity generation

, 17% of total final consumption

Gas

consumption by sector: Electricity and heat 41%, industry 29%, other energy 11%,

services 8%, residential 10%, transport 0.8

Overview

Natural gas places third in Spain’s total final consumption (TFC), after oil and electricity.

Natural gas’ share has increased steadily in total energy supply over the years, reaching

25% in 2019. Heat and electricity generation has been the main gas-consuming sector

over the past two decades, with a sizeable increase in the first decade, followed by a

decrease in 2008, and remaining stable since 2014. The industry sector is the

second-largest gas-consuming sector in Spain.

Spain has made considerable changes in the past five years to its natural gas market

operations to increase the system’s efficiency, in particular with the development of the

MIBGAS hub to further integrate the Spanish and Portuguese gas markets. A Spanish gas

exchange market was also developed in 2015 to trade natural gas and liquefied natural

gas (LNG). Moreover, Spain has made notable headway in erasing its tariff deficit in the

gas sector. However, there remains underutilised gas infrastructure, including on the

interconnector between Spain and France. Spain is also currently working with France and

Portugal to create a Solidarity Agreement on Natural Gas to further integrate its gas market

with those of its neighbours.

Spain has placed carbon reduction at the forefront of its energy strategy. To this end, the

government will use biogas and hydrogen road maps to help clarify the main pathways to

increase the share of renewable gases in its energy system.

Total energy supply does not include oil used for international bunkering.

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Supply and demand

The share of natural gas in total energy supply (TES) in Spain increased over the period

from 2000 to 2019, as it dd in total final consumption (TFC), albeit at a more moderate rate

(Figure 10.1). Natural gas was 13% of TES in 2000, 25% in 2009 and 25% in 2019, while

it accounted for 14% of TFC in 2000, 15% in 2009 and 17% in 2019. Electricity generation

from natural gas was relatively low in 2000 at 9%, increasing to 37% in 2009 and

decreasing again to 31% in 2019; fluctuations are, in part, due to variations in the share of

hydro generation.

Figure 10.1 Natural gas in energy production, total energy supply, electricity and

total final consumption in Spain, 2000-19

Natural gas accounts for a relatively small share of Spain’s overall energy consumption and

total energy production.

Notes: TES = total energy supply. TFC = total final consumption.

Source: IEA (2021a), IEA World Energy Statistics and Balances (database), www.iea.org/statistics

Spain’s natural gas consumption increased significantly until 2008, largely driven by an

uptick in natural gas consumption in electricity and heat generation (Figure 10.2).

After 2008, consumption of natural gas gradually declined, but rose sharply in 2019.

Natural gas in electricity and heat generation decreased from 2009 to 2018, but rose again

in 2019 due to the substitution of coal for natural gas. Gas consumption in the industry,

residential and services sectors remained relatively constant from 2008 onwards.

10%

20%

30%

40%

Domestic energy production TES Electricity generation TFC

Share of natural gas

2000

2005

2009

2015

2019

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Figure 10.2 Natural gas consumption in Spain by sector, 2000-19

Natural gas consumption trends were heavily influenced by demand shifts in the electricity

and heat generation sector.

* Services/other includes commercial and public services, agriculture, forestry, and fishing.

** Industry includes non-energy consumption, oil and gas extraction, and other energy sector use.

Note: bcm = billion cubic metres.

Source: IEA (2021a), IEA World Energy Statistics and Balances (database), www.iea.org/statistics

Seasonality of natural gas demand can vary considerably in Spain. In 2019, 47% of

consumption for power generation occurred between June and September. August

showed the lowest demand for non-electricity sectors, while July had the highest

consumption for power generation. Seasonality in the household and commercial sectors

is more pronounced. The six months from May to October represented only 22% of total

consumption in this segment, with the remaining consumption (78%) concentrated in the

other six months.

Spain’s natural gas supply is diversified, in part due to regulation on security of supply,

which requires that shippers diversify their portfolios if supplies of natural gas from the

same origin country are higher than 50% of national consumption (see below on

regulation). Spain’s total natural gas net imports in 2019 stood at 31.6 billion cubic

metres (bcm). Algeria is Spain’s dominant supplier (mainly pipeline), accounting for

around one-third of Spain’s total imports in 2019 (12.3 bcm). In 2019, Qatar was Spain’s

second-largest natural gas import source along with Nigeria (4.3 bcm or 12% each),

followed by the United States (4.1 bcm or 11%). Imports from Algeria grew from 10.8

bcm in 2000 to 12.3 bcm in 2019 (Figure 10.3).

Looking ahead, under its National Energy and Climate Plan (NECP), Spain anticipates

flat demand for natural gas from 2015 levels in a target scenario under which primary

energy consumption increases by around 3% from 2015 to 2030, growing from around

27 bcm in 2015 to 30 bcm in 2020 and 27 bcm in 2025 and 2030 (EC, 2020). Under a

target scenario in which final energy consumption grows by 15% to 2030, natural gas

consumption is expected to grow by around 5%. As such, there remains some

uncertainty surrounding future demand for gas, notably the role that gas will play in

providing power system flexibility as the electricity mix shifts to one dominated by

variable renewables (see Chapter 7).

bcm

Other energy

Electricity and heat

generation

Services/other*

Transport

Residential

Industry**

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Figure 10.3 Spain’s natural gas net imports, 2000-19

Spain’s natural gas net imports are predominantly from Algeria, Qatar, Nigeria and the

United States.

Note: bcm = billion cubic metres.

Source: IEA (2021a), IEA World Energy Statistics and Balances (database), www.iea.org/statistics

Spain also exports some of its imported gas. Re-exports, by cargoes and pipeline, are a

recent phenomenon in Spain and reflect the decline in domestic demand since 2008.

Portugal is the main export destination, followed by France.

Spanish companies typically buy both LNG and pipeline gas under long-term contracts.

In 2019, for the first time since 2013, LNG supplies exceeded those of piped natural gas,

accounting for 57% of total supplies, driven by lower prices in the global LNG market.

Gas prices

Spain’s industry gas prices are lower than the IEA average, and amounted to

30.7 USD/MWh, of which 2% comprised taxes, one of the lowest tax rates among IEA

countries (Figure 10.4).

However, for household gas prices, Spain is the fourth-highest among IEA countries at

100.7 USD/MWh, with a 20% tax component.

bcm

Other

Norway

United States

Nigeria

Qatar

Algeria

Total net imports

Net imports

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Figure 10.4 IEA comparison of industry and household gas prices, 2019

Industry

Households

Spain’s industry prices are below the IEA average, while its household prices are the

fourth-highest among IEA countries.

Notes: MWh = megawatt hour. Missing industry data for Australia, Japan, Mexico and Norway. Missing tax rate

industry data for the United States.

Source: IEA (2021b), Energy Prices and Taxes 2020 (database), www.iea.org/statistics

Spain’s natural gas prices in industry and households were both below average compared

to its neighbouring IEA countries from 2000 to 2016, although they followed similar trends

(Figure 10.5). In 2017, Spain’s household natural gas prices surpassed all of its

neighbours, and remains the most expensive to date.

USD/MWh

Tax component

100

120

140

USD/MWh

Tax component

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Figure 10.5 Natural gas prices in industry and households in selected IEA countries,

2000-19

Industry Households

Spain’s natural gas prices follow similar trends to its neighbours.

Notes: MWh = megawatt hour. Data missing for Portugal (2000-01) (industry and household), Italy (2000-03)

(industry and household), and Greece (2006) (industry and household).

Source: IEA (2021b), Energy Prices and Taxes 2020 (database), www.iea.org/statistics

Institutions

The Ministry for the Ecological Transition and the Demographic Challenge (MITERD) is

the main energy policy body within the Spanish government. For the gas sector, its

responsibilities include overseeing shipper registration as well as authorisation of

infrastructure, including high-pressure grids, LNG terminals and subterranean storage. It

also carries out safety regulations (including ensuring facilities meet requisites and

undertaking periodic inspections), ensures security of supply (including strategic reserves

obligations and supply diversification requirements), ensures gas quality, promotion of

renewable gases (biogas, biomethane and hydrogen), and oversees revenues and

third-party access tariffs for underground storage.

After the approval of Royal Decree-Law 1/2019, all competencies related to access

conditions, allocation capacity, third-party access and regulated revenues were transferred

to the regulator, the National Commission for Markets and Competition (CNMC), with the

exception of revenues and tariffs for subterranean storage.

The CNMC was founded by Law 3/2013 and its functions related to natural gas were

expanded under Royal Decree-Law 1/2019. It is an independent entity, governed by an

Advisory Board composed of ten independent advisers appointed by the government

based on a prior review by a parliamentary commission, which has a refusal right. Its

mandate is for six years.

USD/MWh

Spain Portugal Italy France Greece

100

120

140

160

USD/MWh

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The CNMC is also financially independent as it receives a percentage of third-party access

tariffs (currently 0.14%). Its tasks related with natural gas are:



regulated revenues and third-party access of the transmission grid, LNG terminals and

local distribution networks



access conditions



balancing



assessment of investment plans of transmission companies



access conflicts resolution



unbundling monitoring



sector survey.

Lastly, local distribution networks and medium pressure transport branches fall under the

authority of regional governments.

Natural gas industry structure

The Spanish natural gas sector is privately owned and operated; this includes the

regulated activities of transmission, distribution, LNG terminals and underground storage,

as well as unregulated activities like production, trading and retail sales.

Enagás owns and operates most of Spain’s high- and medium-pressure grid, as well as

three of the country’s six operating LNG terminals (and large stakes in two other terminals).

The Hydrocarbons Act establishes the model for unbundling of the gas transmission

system operator (TSO). The unbundling model adopted for the main TSO (Enagás, with

more than 95% of transport pipelines) is ownership unbundling, while small TSOs can

choose between an ownership unbundling and independent system operator model. The

CNMC is in charge of the certification procedures for system operators and has already

certified Enagás and Reganosa as TSOs.

Spanish regulation requires legal and functional unbundling of distribution companies from

supplier and producer companies. There are seven distribution companies in Spain, with

Nedgia Group (formerly Gas Natural Fenosa) controlling 69% of supply points. Since early

2018, only the main distribution supply operator (DSO; Nedgia Group) remains ownership

unbundled as a vertically integrated company with supply activities. The other DSO

groups – Nortegas, Madrileña and Redexis – were created as a result of the disinvestment

in DSO grids from EDP, Gas Natural Fenosa and Endesa, respectively.

All Spanish customers (including households) have been free to choose their gas suppliers

since 1 January 2003. Since July 2008, regulated tariffs for end users (last-resort tariffs)

only apply to residential consumers consuming less than 50 000 kilowatt hours per year

(kWh/year) and connected to a low-pressure network; they are supplied by four designated

last-resort suppliers (see below for more details).

In recent years, more municipalities have been connected to the gas grid, with 33

connected in 2018 and 13 in 2019, reaching a total number of 1 805 municipalities

connected. Nowadays, almost 80% of the population lives in a municipality with natural

gas access, but only 30% of homes have a natural gas connection.

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At the end of 2019, Spain had 7.9 million natural gas supply points, which have been

steadily rising over the past decades.

The number of gas traders registered in Spain at the end of 2019 reached 198 companies,

out of which 47 have stated they will operate exclusively in wholesale gas and capacity

markets, without supplying final customers. The number of marketers who have signed an

access contract to the balance point and/or the framework contract for access to gas

facilities at the end of 2019 was 143. The number of traders registered in MIBGAS at the

end of 2019 was 105 and rose to 144 at the end of 2020. The number of marketers who

make sales to final consumers reached 85 in 2019.

Natural gas regulation

The basic regulations for the Spanish gas sector are set in Law 34/1998, the Hydrocarbons

Act, which defines the Spanish gas sector as a single, integrated gas system comprising

all regulated gas infrastructure, including local distribution grids, gas transmission

networks, LNG terminals and underground storages. All of these facilities are subject to

third-party access, regulated revenue, capacity allocation and balancing procedures. They

are all part of a common clearing system matching regulated revenues with incomes from

third-party access tariffs. In this arrangement, Enagás is the technical system manager of

all of the facilities, giving instructions to different facilities to fulfil daily supply requirements

in the most efficient way.

The administrative procedure for authorisation of high-pressure transmission pipelines by

MITERD depends on whether the pipelines are part of the “Red Troncal” (Trunk Grid),

which, according to Law 34/1998, includes all the high-pressure gas pipes that are deemed

essential for security of supply. Under Law 34/1998, if a gas pipeline is categorised as

“Red Troncal”, authorisation is granted directly to the main owner of the network: Enagás

Transporte. Otherwise, the gas pipeline is assigned through a bidding procedure

developed in Royal Decree 984/2015.

All gas infrastructure facilities under the government’s purview must be previously included

in the Energy Planning Document, which lists all facilities required to match expected

demand. Administrative authorisation of a project is granted by the Directorate of Energy

Policy and Mines. Prior to this, the project is submitted for a general public consultation so

anyone affected can appeal. An environmental assessment study is carried out if the

project meets the requirements set out under Law 21/2013 on Environmental Assessment.

Projects are declared to be of “public interest” if they meet the requisites. After completion,

infrastructure is tested to check whether it accomplishes the capacity and stipulations

included in the administrative authorisation. If the tests are positive, a commissioning

document allows the facility to start operations. The revenue settlement scheme under the

authorisation must elaborate on third-party access regimes and include details of terms of

access, tariffs and connection provisions.

Transmission grids, local distribution networks, subterranean storages and LNG terminals

are subject to third-party access requirements, which include regulated procedures for

access conditions, capacity allocation, third-party access tariffs, revenues and a

settlement procedure to match third-party access tariff income with regulated revenues.

Congestion management procedures at interconnectors are regulated by the CNMC.

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Under Royal Decree-Law 1/2019, the CNMC is the entity responsible for establishing the

methodology to set tariffs for the use of the transmission grid, LNG terminals and local

distribution networks, while the government sets subterranean storage tariffs. As CNMC

Instruction (Circular) 6/2020 will not fully enter into force until October 2021, shippers are

currently charged tariffs published by MITERD, according to Royal Decree 949/2001,

which has basically remained unchanged since December 2013.

In order to participate in the Spanish gas market, a company must be registered with

MITERD through a “declaración responsable” (responsible statement), in which it

acknowledges completion of requirements to become a registered shipper published in

Chapter III of Royal Decree 1434/2002. The requirements are mainly to demonstrate

technical skills and sufficient financial capacity to undertake the business and to submit

warranties to cover one-year payments. Afterwards, the ministry informs the CNMC, which

includes the name of the company on the List of Registered Shippers.

A new legal framework was introduced in 2014 to balance system costs and revenues.

After some deficits recorded in 2015-17, since 2018 the gas network has delivered a

financial surplus, and the trend is expected to continue in the coming years. In

October 2015, Royal Decree 984/2015 introduced a procedure to authorise regional

transmission pipelines through an auction procedure with a regulated revenue scheme

based on real gas flows, so no additional costs will be imposed on the gas system if

demand does not meet expectations. Nonetheless, based on the demand outlook, no

major new gas infrastructure is foreseen in Spain.

Since 2015, the main changes related to gas facilities management have been focused on

increasing the efficiency of the system through the development of the MIBGAS gas hub

(as integrated Spanish and Portuguese gas markets) and the implementation of regulation

principles for all regulated infrastructure. In order to reduce entry barriers to the domestic

gas market and enhance shipper flexibility, a Spanish gas exchange market was

developed in 2015 to trade natural gas and LNG.

In 2019, the CNMC introduced a unique approach to managing Spain’s regasification

capacity by consolidating trading among the various LNG tanks into a single trading hub.

The goal of the new approach was to increase utilisation of regasification capacity and

facilitate booking of capacity among various market participants. CNMC Instruction

(Circular) 8/2019 establishes access conditions and capacity allocation procedures for all

regulated facilities of the natural gas system. It sets duties and rights of shippers and facility

owners, lists the standard capacity products offered (yearly, quarterly, monthly, daily and

intraday), and introduces a virtual LNG tank, which adds up all the current LNG tanks

regardless of which terminal they belong to.

The Balancing Circular 2/2020 introduced two new balancing zones – in addition to the

traditional one in the transmission grid (Punto Virtual de Balance, or PVB): the virtual LNG

tank that combines all LNG terminal capacity and a virtual underground storage that

combines all storage capacity. In these three zones, natural gas and LNG can be freely

traded wherever LNG terminals or underground storage are located, a circumstance made

possible thanks to Spain’s extensive gas transmission network that operates with low

congestion rates.

Based on these changes, in July 2020, the government started to offer capacity in Spain’s

LNG terminals via an auction system. For the year 2021, 90% of the capacity was offered

to the market, while 50% of the capacity in the following 15 years (2022-36) was offered.

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In 2021, 40% of the remaining 2022 capacity will be offered to the market, and likewise in

the following years. The last 10% of available capacity will be offered on a monthly market,

one month before usage, throughout 2021 until 2036.

CNMC Circular 2/2019 established the methodology to set the interest rate applied in the

calculation of the regulated revenues of transmission and distribution of electricity,

regasification, and transportation and distribution of natural gas. The rate is unchanged for

the six years of the regulatory period (from 2021 to 2026, both included). CNMC

Circular 1/2020 establishes the methodology to set the revenue applied to the system

manager (Enagás ) while CNMC Circular 9/2019 establishes the methodology to set the

revenue applied to transmission facilities and LNG plants. It includes amortisation using a

pre-defined lifespan, a financial rate applied to assets’ net value and operational costs

based on standard average costs. Lastly, CNMC Circular 4/2020 establishes the

methodology to set the regulated revenue for local distribution networks. It is based on the

number of customers and volume of gas sold, with a five-year extra-revenue provision for

new local distribution networks.

Within MITERD, the Directorate General for Energy Policy and Mines each year

determines the capacity to offer as interruptible service at those points in the system where

congestion may occur. The capacity offered is allocated via auction annually among

marketers who request it.

Natural gas market operation

In December 2015, a new Iberian Gas Market platform “MIBGAS” was launched in Spain

following the principles of the European Gas Target Model.

Based on the principles informing that model, the organised gas market has a platform for

trading in gas products to be delivered at the virtual balancing point and other local points

in the gas system for different time horizons. All shippers, distributors, retailers and direct

consumers may buy or sell gas via these products according to their commitments and

needs. Likewise, and pursuant to the Code on the Balancing Network, the technical

manager of the gas system is to participate in the organised gas market in order to

purchase or sell the gas required to enable it to perform its balancing actions and ensure

the viability of programmes.

The following core concepts define the organised gas market’s operating model:



gas trading, both at the virtual balancing point and at one or more local points



contracting capacity independently for gas inputs and outputs on the network



daily balancing of operations



firmness of trades in the market, with a commitment to deliver



involvement of the technical manager of the gas system for balancing procedures and

ensuring supply.

Spain’s Law 8/2015 on the Hydrocarbons Industry designates the company MIBGAS as

the organised gas market operator. As such, MIBGAS is responsible for the management

of the organised gas market, required to undertake the necessary and appropriate duties

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for its operations and the economic management of its services, upholding the principles

of efficiency, effectiveness, transparency, objectivity, non-discrimination and

independence. To this end, it is charged with:



arranging and accepting the registration of prospective agents



defining and listing the products accepted for trading



receiving orders for the purchase and sale of gas, and of any products involved in the gas

supply chain that may at some time be traded, conducting their validation, management

and matching, as well as calculating the prices arising from the matching processes



disclosing on a daily basis the prices and volumes traded for each of the market products,

as well as the reference prices and, among them, those to be used in the settlements of

imbalances



performing directly, or through a third party acting as counterparty, the settlements of

market processes, invoicing and collection and payment processes, as well as managing

market guarantees



providing each technical manager, or those parties as appropriate, with information on

trades made by agents in the market, per the provisions of current legislation



send the information required in the Regulation on Wholesale Energy Market Integrity and

Transparency (REMIT) that falls within its responsibility to the Agency for the Cooperation

of Energy Regulators platform.

Since 2015, the product portfolio traded in MIBGAS has grown substantially, currently

comprised not only of short time products delivered at the virtual balancing point, but also

natural gas with longer delivery terms, LNG products and balancing services. Since January

2018, MIBGAS has also been authorised to trade natural gas products delivered outside the

Spanish gas system.

To increase its liquidity, since 2017, voluntary market makers have been in operation in

MIBGAS, and since 2018 incumbent shippers in the Spanish market perform as mandatory

market makers, according to provisions included in Law 8/2015. Market makers serve to

increase liquidity in the organised gas market by submitting orders so other exchange

participants can find a counterparty at a market price.

Trading on the market is organised into trading sessions, with the possibility of trading one

or more products in each session. In turn, a session may involve two types of trading: auction

or continuous market. Each session’s details are specified by means of a market resolution.

There are currently two types of sessions: 1) a daily trading session with trading in daily,

month-ahead and balance of month product; and 2) an intraday trading session with trading

in intraday products.

Since 2018, there is another platform called MIBGAS Derivatives, which manages the

exchange trading of future natural gas products, spot LNG products and spot underground

storage products in the Iberian peninsula. Prior to this, Spain did not have a market to trade

natural gas futures products. MIBGAS Derivatives offers the following futures products with

physical delivery: monthly, quarterly, biannually and yearly.

The MIBGAS Derivatives products complete the current portfolio of natural gas products

offered by the organised gas market, with a distinction between current regulated products

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(spot and prompt market) and future products (futures market). In addition, new products of

LNG in regasification plants tanks and natural gas in underground storages are also offered.

Throughout its short history, MIBGAS has been growing both in traded volume and agents,

and has established itself as an emerging hub within the European gas market, while

consolidating itself as a valid price reference in the Iberian peninsula. In 2019, trading

volumes doubled from 2018 levels, while the number of traders grew to 105; by the end of

2020, the number of traders had increased to 144. Traded volumes reached 26.3 terawatt

hours (TWh) in 2018 and 56.1 TWh in 2019. Still, overall liquidity remains relatively low.

After accounting for 24.66 TWh of volume traded over-the-counter, the churn rate in the

market is still below 0.5; a market is usually considered liquid when the churn rate is at

least 10.

Natural gas policy

Upstream

Spain relies on natural gas imports as domestic production is negligible, accounting for

less than 1% of total natural gas demand. There are very few fields, with low production,

as they are in a declining phase. In 2015, the El Ruedo field stopped producing, but in 2015

trial production began at the Viura field, commissioned in 2017. Production at this field

represented more than 90% of domestic gas production in 2019.

Exploitation of unconventional resources has been controversial among the public,

especially hydraulic fracturing, and has therefore never been conducted in Spain.

In recent years, exploration and production (E&P) activity has been on a downtrend,

without any new projects. In addition, the Bill on Climate Change and Energy Transition,

currently in the process of been passed into law, forbids all E&P activity, including offshore

projects. The bill also bans the authorisation of unconventional projects in which the use

of high-volume hydraulic fracturing is foreseen. As such, E&P activity is expected to come

to an end in Spain.

Last-resort tariff

There is a free market for natural gas pricing in Spain regardless of the distribution network

to which a consumer is connected or the company with which the service is contracted.

Several tariffs are available in the market to the almost 8 million natural gas consumers.

Nevertheless, consumers connected at a pressure below 4 bar with an annual

consumption under 50 000 kWh qualify to subscribe to a last-resort tariff at below market

rates in two ranges: 0-5 000 kWh and 5 000-50 000 kWh.

Under the first tariff (< 5 000 kWh), the fixed component of a consumer’s bill (amount paid

monthly regardless of consumption) is reduced, while the variable component (the gas

consumed) is higher. Under the second tariff (5 000-50 000 kWh), the fixed component of

the bill is higher, but the variable component is lower (Endesa, 2020).

Of all the households that qualify for the last-resort tariff, at the end of 2019, 6.3 million

customers were supplied under the free market price, while 1.6 million consumers (19.92%

of the total) were supplied under last-resort tariffs.

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Consumers under the last-resort tariff are supplied by four retailers that have been

designated as suppliers of last resort: Comercializadora Regulada Gas & Power (Gas

Natural Group), Baser Comercializadora de Referencia (EDG Group), Energía XXI

Comercializadora de Referencia (Endesa Group) and Curenergia Comercializacion de

Ultimo Recurso (Iberdrola Group).

Last-resort tariffs are calculated by a formula established by a ministerial act that includes

the price of natural gas, fees and levies, commercial costs, and security of supply costs.

The natural gas cost is updated every quarter and published in the Official Journal by the

Directorate of Policy Energy and Mining as long as the cost varies more than 2% (either

higher or lower). This cost depends on a mix of international price indexes including the

Brent oil price for long-term supply and NBP natural gas futures and options for the short

term. As the price is set in calorific value (KWh), Enagás provides information on its

website about the gross calorific value in every town.

Social bonus

Royal Decree-Law 15/2018 on urgent measures for the energy transition and consumer

protection established the “Bono Social Térmico” (BST, or thermal social bond). It is an

economic aid programme to compensate for the costs borne by the most vulnerable

consumers for the use of energy for heating and hot water or cooking. It is applied as a

discount on gas bills.

The BST applies to all vulnerable consumers, regardless of the fuel they use to heat their

homes (natural gas, electricity, liquefied petroleum gas [LPG], etc.). All customers who

qualified for the electricity social bonus as of 31 December of the previous year are eligible

for the gas bonus (see Chapter 7). The budget allocated in 2019 (charged to the general

state budget) for this aid was EUR 75 million. For the year 2020, the budget allocated was

EUR 90 million as the number of people who can benefit from the BST increased by

approximately 200 000, to 1.27 million.

The aid for each vulnerable customer ranged between EUR 25 and EUR 124 per year.

The amount depends on the degree of vulnerability and climatic zone in which a residence

is located (the aid is greater in cold zones). In the case of a severely vulnerable customer

or one at risk of social exclusion, the aid will increase by 60% compared to that for each

corresponding climatic zone.

Responses to the COVID-19 pandemic

As a result of the COVID-19 pandemic, the Spanish government, led by MITERD, enacted

the following measures:



Close monitoring of changes in gas demand and natural gas infrastructure; no risks were

identified beyond the consumption reduction compared to previous years’ levels.



Exceptionally, as long as the state of emergency was in effect, the supply of electricity,

petroleum products, natural gas and water must not be suspended in any home considered

a main residence (even if such a possibility is stated in supply contracts signed by

consumers).



More flexibility granted to small and medium-sized enterprises in terms of energy

(electricity and gas) contracts to alleviate their burden during the state of emergency.

10. NATURAL GAS

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

A possibility to suspend electricity and gas bills for freelancers and small and medium-

sized enterprises.



Suspension of the methodology to determine the last-resort tariff for natural gas for six

months from March 2020 to protect vulnerable customers (an exception was included to

modify the maximum prices if the modification implies a reduction from the prevailing level).

Renewable gases

Spain has more recently embarked on a plan to increase the use of renewable gases in

its energy sector as a pathway to decarbonisation. To this end, the government has plans

to promote the use of biogas, biomethane and hydrogen from renewable sources (see

Chapter 5 for more details).

In 2019, 100 gigawatt hours (GWh) of biomethane was injected into the gas grid from one

plant in Valdemingómez, Madrid. Power generation from biogas stands at 234 megawatts

(MW), and 55 tonnes of oil equivalent [toe] of biogas is employed in thermal uses.

The government plans to significantly expand these levels based on a Biogas Roadmap

that is currently under development. An initial public consultation ended in June 2020 and

several working groups are currently putting together a draft road map, which will then be

released for public comment before being finalised. The issue of injecting biomethane into

existing grids was a particular focus area on which the government requested stakeholder

inputs.

The government has also issued a Hydrogen Roadmap for the development of renewable

hydrogen in Spain in October 2020, in line with the European Hydrogen Strategy.

In the short and medium term, the government’s focus will be on boosting the production

and consumption of biogas and biomethane, while it sees renewables-based hydrogen as

an important longer term opportunity.

Natural gas infrastructure

Transmission and distribution network

The Spanish gas grid reached a total length of 11 369 km in 2019, with seven LNG

terminals (six operating) and four underground storage facilities, providing natural gas to

1 805 municipalities and 7.9 million supply points. Moreover, the gas pipeline network has

19 compression stations, 45 transmission centres, and 416 measurement and regulation

stations. Notably, the circular structure of the gas grid allows nearly every region of the

country to be supplied from two directions. All this allows smooth distribution of gas

throughout the national territory, ensuring security of natural gas supply even in peak

demand situations.

The natural gas transmission network has eight main lines: the Central Axis, Eastern Axis,

Western Axis, Spanish-Portuguese Western Axis, Axis of the Ebro, Cross Axis,

Connection to Medgaz, and the Gas Pipeline to the Balearic Islands.

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ENERGY SECURITY

Figure 10.6 Map of Spain’s natural gas infrastructure

Source: Spanish administration’s response to the IEA questionnaire.

Interconnections

Spain’s international gas pipelines include: the Magreb pipeline (Tarifa-Morocco), the

Medgaz pipeline (Almería-Algeria), the International Connection with France (VIP Pirineos:

Irún and Biriatou) and the International Connection with Portugal (VIP Ibérico: Tuy and

Badajoz).

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Table 10.1 Technical capacity (firm and interruptible) of international

interconnections (GWh/day)

Import

Export

Tarifa (Morocco)

444

–

Almería (Algeria)

306

–

VIP Pirineos (France)

225

VIP Ibérico (Portugal)

144

Note: GWh = gigawatt hour.

Source: Spanish administration’s response to the IEA questionnaire.

Two main interconnection projects have been planned for several years: STEP with France

and the Third Interconnection with Portugal. STEP was also designated as an EU Project

of Common Interest in 2013. Nevertheless, after the TSOs of France and Spain issued an

investment request in July 2018, the national regulatory authorities in both countries

rejected it in January 2019. No gas projects from Spain, Portugal and France were

included in the 4th List of Projects of Common Interest approved by the European

Commission.

Liquefied natural gas

Spain maintains Europe’s largest fleet of LNG terminals, with seven facilities – six in

operation. The Spanish gas system has a total of 25 fuel tanks storages, 8 berths and

capacity to receive methane vessels of up to 270 000 cubic metres (m

). In 2019, gas

receipts from LNG terminals to the transmission grid saw a significant rebound of almost

57% compared to 2018. However, the utilisation rate of Spain’s LNG regasification

capacity is relatively low, at only 21% on average between 2012 and 2018 (GIE, 2021).

Table 10.2 Spanish liquefied natural gas import terminals (operating facilities)

LNG

terminal

LNG

storage

capacity

)

Send out

capacity

/hour)

LNG

tanks

LNG trucks

(GWh/day)

Docks

Maximum

docking

capacity

)

Barcelona

(Enagás)

760 000

1 950 000

266 000

Huelva

(Enagás)

619 500

1 350 000

175 000

Cartagena

(Enagás)

587 000

1 350 000

266 000

Bilbao (BBG)

450 000

800 000

270 000

Sagunto

(Saggas)

600 000

1 000 000

10.5

266 000

Mugardos

(Reganosa)

300 000

412 800

10.5

266 000

Note: GWh = gigawatt hour.

Source: Spanish administration’s response to the IEA questionnaire.

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ENERGY SECURITY

In 2019, LNG storage capacity of regasification plants in Spain was unchanged, as was

average send out capacity, though production increased to 659 GWh/day from

430 GWh/day in 2018. On the other hand, the loading of LNG trucks increased by 7%,

doubling the increase in 2018 and reaching 12 597 GWh. As for stocks in tanks, the annual

average was 60%, reaching as high as 94% on certain days. As of 31 December 2019,

the accumulated storage in regasification plants reached 71% of total capacity.

Storage

In order to adjust supply to meet changing demand, including consumption peaks brought

on by seasonal variations, it is beneficial to store large quantities of gas in strategic

locations for use under such circumstances (see below).

Spain currently has four underground storages in operation: Gaviota (offshore), Serrablo,

Yela and Marismas. Enagás manages the first three while Naturgy Almacenamientos

Andalucia manages the Marismas gas storage. The capacity in the four storage facilities

for the period from 1 April 2019 to 31 March 2020 was 33 253 GWh (around 3 bcm)

Gas injected into storage in 2019 reached 12 869 GWh (1.16 bcm), with an 87% increase

compared to 2018. On the other hand, extraction was 5 489 GWh (0.49 bcm). The high

utilisation of storage was reflected in its high contracted capacity; the maximum annual

contracting of 31 011 GWh (2.79 bcm) took place in November 2019.

Natural gas security of supply

Institutional responsibilities

The Specialized Energy Security Committee is a support body of the National Security

Council, created in 2017 as Spain’s National Emergency Strategy Organisation. The

committee, presided over by the Secretary of State for Energy, is supposed to meet at

least every two months, or as many times as it deems appropriate. With respect to energy

security, the committee’s functions include:



Propose to the National Security Council the guidelines for planning and co-ordinating

national security policy related to energy security.



Contribute to reinforcing the proper functioning of the National Security System in the field

of energy security, whose supervision and co-ordination is the remit of the National Security

Council.



Support the National Security Council in its function of verifying the degree of compliance

with the National Security Strategy and propose, where appropriate, its revision, in relation

to energy security.



Contribute to the elaboration of regulatory proposals to strengthen the National Security

System in the field of energy security.

For the purpose of this document, we assume that to arrive at standard (GCV=40 MJ/m

) bcm units, values expressed

in TWh should be divided by 11.1 (or multiplied by 0.09). Consequently, 1 bcm of natural gas = 11.1 TWh.

10. NATURAL GAS

178



Support the National Security Council’s decision making in matters pertaining to the field

of energy security, through the analysis, study and proposal of initiatives both nationally

and internationally.



In support of the Specialised Situation Committee, carry out an assessment of risks and

threats, analyse possible crisis scenarios, especially those likely to lead to a situation of

interest to national security, in the field of energy security, and evaluate the results of its

execution, all in co-ordination with the directly competent bodies and authorities and with

the Specialised Situation Committee.

The Corporación de Reservas Estrategicas de Productos Petrolíferos (CORES) is

responsible for ensuring security of supply for oil products, liquefied petroleum gas and

natural gas in Spain. In 2013, CORES was designated Spain’s central stockholding entity

as defined in EU Directive 2009/119. In this capacity, it is responsible for controlling the

minimum stockholding obligations as well as for verifying operators’ obligations to diversify

their natural gas supplies.

Regulatory framework

The gas security framework in Spain is based on national and European legislation. At the

national level, the Hydrocarbon Law of 1998 and Royal Decree 1714/2004 established the

basis for natural gas security of supply. The main measures to safeguard the security of

gas supply are:



The obligation to diversify the supply of natural gas: When the supplies of natural gas for

national consumption from the same origin country are higher than 50% of national

consumption, then shippers or self-consumers that have a share of imports higher than

7% must diversify their portfolios in order to have gas supplies lower than 50% from that

origin country.



Stockholding obligations on natural gas operator: The shippers and self-supplied

consumers must maintain at all times natural gas stocks equalling 20 days of firm sales or

consumption during the preceding calendar year (firm sales are supplies that cannot be

interrupted, for either commercial or technical reasons). The stocks must be kept in

underground storage. The government assumes control of the strategic stocks in

emergency situations.

As an additional measure, the Spanish administration enforces a Winter Action Plan, which

lays out additional requirements for shippers from 1 November to 31 March in accordance

with the Gas System Technical Management Rules. The Winter Action Plan is approved

on a yearly basis by the Directorate General for Energy Policy and Mining at MITERD and

includes additional minimum stocks levels (3.5 days of contracted LNG capacity between

1 November and 31 March), a method to predict the increase of demand in case of a cold

spell and a cold spell definition.

Furthermore, the Spanish natural gas system is based on the System Technical

Management Rules, with a procedure to cope with exceptional situations that may affect

the operation of the system. The system operator (Enagás) is responsible for putting this

procedure into practice, declaring the level of emergency and co-ordinating the actions of

system users.

LNG also plays an important role in bolstering Spain’s supply of gas security as it provides

a high degree of flexibility and source diversification. Moreover, the geographic location of

Spain, with access to both the Atlantic and Mediterranean basins, increases the scope of

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ENERGY SECURITY

available LNG sources, allowing gas suppliers to import gas from virtually any LNG

producing country. Moreover, LNG also serves as a competition driver, enabling

newcomers to access the wholesale market and introduce gas in the Spanish network via

spot sales.

At the European level, EU Regulation 2017/1938 establishes provisions to safeguard the

security of gas supply in the European Union by ensuring the proper and continuous

functioning of the internal market in natural gas. It allows for exceptional measures to be

implemented when the market can no longer deliver the gas supplies required, including

solidarity measures of last resort with neighbouring countries. It also provides a clear

definition and attribution of responsibilities among natural gas undertakings, member

states and the European Union regarding both preventive action and reaction to concrete

disruptions of gas supply. Spain is currently working with France and Portugal to create a

Solidarity Agreement on Natural Gas.

To ensure maximum preparedness, avoid a disruption of gas supply and mitigate its effects

should it nevertheless occur, EU Regulation 2017/1938 also establishes that member

states have to elaborate national risk assessments, preventive action plans and

emergency plans at least every four years.

In addition, the regulation created risk groups, based on the main gas supply sources and

routes. These risk groups serve as the basis for strengthening regional co-operation in

order to increase the security of gas supply and make it possible to conclude agreements

on appropriate and effective cross-border measures of all interested member states within

risk groups or outside of them along the emergency supply corridors.

Risk assessments

Spain has co-ordinated the elaboration of the Algeria Risk Assessment and has

participated in the Norway Risk Assessment. The conclusions from the Algerian risk group

indicate strong resilience, even in the event of a complete interruption of Algeria's gas

supply (including LNG), an unlikely event.

Spain submitted the National Risk Assessment and the Preventive Action Plan and the

Emergency Plan for the period 2019-2023 to the European Commission as required under

EU Regulation 2017/1938.

In the Spanish system, the infrastructure with the greatest send out capacity to the network

is the regasification plant in Barcelona, with a send out capacity, regasification and cistern

load of 559 GWh/day (48.1 mcm/day). Under the N-1 formula, applied to the Spanish gas

system, the risk assessment obtained results of over 123%, in accordance with the

demand and infrastructure scenarios forecast for four winters.

A number of other risks were analysed, including disruption to other LNG terminals and

main interconnectors, though none presented problems to gas supply to protected

customers. The greatest potential risk identified for the Spanish gas system is the total

failure of the main supplier (Algeria), whose gas deliveries into the Spanish gas system

accounted for 48% of the total in 2017, 9% less than in 2016 (even though such a failure

has never occurred, even during the period of instability in Algeria during the 1990s). Risks

are further minimised by the growing liquidity and flexibility of the global gas market, the

capacity for LNG supplies into the Spanish gas system, supply diversification available to

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180

marketers, and the renewal or renegotiation of contracts to make their clauses more

flexible and to contemplate spot contracts.

Preventive measures outlined in the Preventive Action Plan, in addition to the obligation to

diversify natural gas imports, stockholding obligations and the Winter Outlook Plan, include

investments in gas infrastructure, flexibility of entry points, interruptible contracts, fuel

switching at power plants and greater use of renewable sources, among others.

Emergency response

The emergency response measures of the Spanish gas system are described in detail in

the Emergency Plan. In accordance with EU Regulation 2017/1938, there are at least three

crisis levels: early warning, alert and emergency. Each one adopts different emergency

response measures. Early warning measures include modifications of shipping schedules

and optimising logistics at LNG terminals. Alert level measures include application of

interruptible contracts and fuel switching at power plants, notably greater use of renewable

energy sources. Emergency level measures include temporary interventions in the gas

market, use of emergency natural gas stocks, suspension of rights to access facilities and

government authorisation of natural gas sales abroad.

Additionally, other measures included in the Emergency Plan are interruption of natural

gas supply to certain consumers and the use of strategic stocks. The priority of gas supply

follows this order: 1) protected customers, including households; 2) consumers who are

not industrial or protected customers; and 3) industrial consumers with firm supply,

including power plants.

Assessment

The Spanish gas system went through major changes from the beginning of the 2000s,

with rapidly increasing demand and the construction of new infrastructure, followed by a

substantial decline in demand due to the economic crisis starting in 2008. In 2012,

construction of new infrastructure was stopped. Gas demand reached a low point in 2014,

with consumption of 300 TWh (27.2 bcm), but since then demand has gradually grown to

400 TWh (35.4 bcm) in 2019. Gas demand has, however, not rebounded to the levels seen

before the economic crisis, or to the levels that were expected when the expansion of the

system was planned. Thus, the system has abundant capacity both in terms of supply

options and transmission capacity across the country.

Spain has very little indigenous production; 99% of gas supply is imported. The Spanish

gas system has numerous supply options through both pipelines and especially through

LNG terminals, which enhance its security of supply. Utilisation of the country’s LNG

terminals in 2019 ranged between 15% and 77%. The capacities of the interconnectors

with France and Algeria have been contracted close to their nameplate capacity (84% and

82%, respectively), while the capacity with Morocco has been contracted at 56% of

nominal capacity. In 2019, the average actual utilisation level of the firm entry capacity with

Algeria was around 66%, while that with France was just below 60% (peak utilisation levels

have been considerably higher than those levels, at close to 100%). As such, the Spanish

gas system currently has plenty of supply options.

In spite of the high utilisation rate on the interconnectors between France and Spain, there

is remaining capacity that is not contracted or utilised to its full potential. The current

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ENERGY SECURITY

capacity between Spain and France is partly firm and partly interruptible. The uncontracted

capacity is interruptible, which makes it less attractive to shippers.

There are 7.9 million gas consumers in Spain, with stable growth of about 1% per year in

the number of consumers over the last few years. Since 2014, there has been a reduction

in the number of consumers who are under the “last-resort price”; their share has fallen,

from 25% in 2014 to 19.9% in 2019, which is still relatively high. The last-resort price is set

in line with the market price and does not entail subsidies to the consumer. In 2018, a

thermal social bond was established, which is an economic aid to vulnerable consumers.

In 2019, 1 million customers were eligible for the BST, and this number increased to

1.27 million in 2020.

According to the NECP, gas demand is targeted to decrease by about 8-9% in the coming

ten years (flat from 2015 levels). There is, therefore, no need for further expansion of gas

infrastructure. While annual gas consumption is not expected to change much, electricity

security in Spain will rely on gas emergency stocks and a flexible gas system. Electricity

security will especially rely on the flexibility of gas-fired combined cycle power plants, as

they can balance the variability of future renewable electricity production, supported by

demand response and interconnections to neighbouring countries. Therefore, the security

of supply of the gas system and the electricity system are closely interlinked, and will

become more so in the coming years.

During the last five years, the emphasis has been on ensuring sustainable financing of the

gas system, following reforms in 2014. The overall balance between income and costs in

the Spanish gas system has gone from a substantial deficit of over EUR 1 billion in 2014

to surpluses in both 2018 and 2019. The remuneration methodologies for gas transport

and access to the system have been modified to ensure that deficits are reduced.

There have been positive developments in the liberalisation of the Spanish gas market

over the last years. The number of registered traders has increased, from 150 in 2016 to

198 in 2019. A similar and even more positive development occurred in the MIBGAS

market, where the number of active traders has more than doubled since 2016 and

surpassed 100 in 2019. Trade on the MIBGAS platform has been enhanced by the use of

voluntary market makers in 2017, and from 2018 onwards the incumbent shippers have

been acting as mandatory market makers. From 2018 to 2019, traded volumes doubled,

and now comprise 12.5% of annual consumption. This development is very positive, but

there is still room for improvement. To this end, the decision to extend the organised gas

market to include Portugal is a good one, and should be implemented as soon as possible.

The recent establishment of a single virtual LNG point and a single virtual storage point in

the Spanish market system are also welcome improvements to the setup of the market.

However, market concentration is still high in the Spanish market, with the four largest

companies covering more than 60% of the market.

In July 2020, the government started to offer capacity in Spain’s LNG terminals via an

auction system. For the year 2021, 90% of the capacity was offered to the market, while

50% of the capacity in the following 15 years (2022-36) was offered. In 2021, 40% of the

remaining 2022 capacity will be offered to the market, and likewise in the following years.

The last 10% of available capacity will be offered on a monthly market, one month before

usage, throughout 2021 and until 2036. There are some restrictions on reselling the

auction capacity bought at a premium, but if the capacity cannot be resold, it can be

returned to the seller. In the coming years, it will be important to ensure that there is

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182

maximum flexibility when it comes to utilising capacity. Reviewing the system in order to

ensure this could therefore be beneficial.

There is very little renewable gas in the Spanish gas system. Currently only one large

landfill gas plant produces biomethane that is injected into the system, accounting for

92 GWh/year. Besides that, biogas is directly used for electricity production, with a total

installed capacity of 234 MW, and 55 ktoe/year is used for thermal uses. The government

is developing a Biogas Roadmap, which will include an assessment of the potential for

biogas in Spain, and for biogas to be upgraded to biomethane and injected into the gas

system.

Likewise, a draft road map for hydrogen was released in October 2020. It includes

provisions to review what is necessary for the injection and use of hydrogen in the natural

gas networks – looking at both storage and adaptation needs in gas transport and usage

equipment.

Given Spain’s ambitious carbon reduction targets, timely issuance and execution of the

road maps will help clarify the role that these renewable gases will play in the Spanish

system.

Recommendations

The government of Spain should:

 Closely monitor developments in the gas sector to ensure that the sector continues to

deliver the flexibility needed to support security of electricity supply in the coming

years.

 Further develop the MIBGAS market, including the integration of Portugal into the

market as soon as possible.

 Quickly finish and execute the envisaged road maps for biogas and hydrogen to

develop the potential for sustainable green gases (biomethane and hydrogen), and

their injection, transportation and storage in the gas system, where technically feasible.

 Work on maintaining firm capacity in both directions on the border with France.

 Develop new measures to deter speculative hoarding of LNG capacity and other gas

infrastructure without hindering resale of capacity to ensure maximum utilisation.

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References

Endesa (2020), “The last resort rate (TUR) for gas”, Endesa,

www.endesa.com/en/discover-energy/blogs/last-resort-rate-for-gas.

EC (European Commission) (2020), Integrated National Energy and Climate Plan

2021-2030, https://ec.europa.eu/energy/sites/ener/files/documents/es_final_necp_main_en.

pdf.

GIE (Gas Infrastructure Europe) (2021), Aggregated LNG Storage Inventory,

https://alsi.gie.eu/#/historical/ES.

IEA (International Energy Agency) (2021a), “World energy statistics”, IEA World Energy

Statistics and Balances (database), www.iea.org/statistics.

IEA (2021b), Energy Prices and Taxes 2020 (database), www.iea.org/statistics.

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11. Oil

Key data

(2019)

Domestic

crude oil production: 49 thousand barrels per day (kb/d), +101% since 2009

et imports of crude oil:

1 336 kb/d, +18% since 2009

Domestic oil products

production: 1 353 kb/d, +14% since 2009

Net

exports of oil products: 56 kb/d (net importer at 286 kb/d in 2009)

Share of oil:

48% total supply (total energy supply and international bunker fuels),

51% total

final consumption

, 5% in electricity generation

Oil consumption by sector:

1 295 kb/d (domestic transport 51

%, international

bunkering

18%, industry including non-energy consumption 13%, services and

agriculture

5%, residential 4%, energy sector including power generation 4%)

Imports of crude oil include crude oil, natural gas liquids and feedstock.

Total energy supply does not include oil used for international bunkering.

Overview

Spain is almost entirely dependent on crude oil imports as domestic oil production is

marginal; however, security of supply in the country is high thanks to robust infrastructure,

including multiple oil terminals, an impressive pipeline network and a refining industry with

capacity exceeding domestic demand.

Oil remains the largest energy source in Spain’s total final consumption (TFC), at 51%,

and the largest in total supply,

at 48% in 2019. These high shares have slowly diminished

over the past few years; oil constituted 54% of total supply in 2000 and 52% in 2009, while

TFC for oil was 61% in 2000 and 56% in 2009.

Domestic transport is the most important energy-consuming sector in Spain and has been

the main cause of fluctuations in oil consumption. Transport contributes heavily to

greenhouse gas emissions (27% of the total in 2016) (EC, 2020). The transport sector

decreased its oil consumption from 2007 to 2013, but it increased again thereafter.

However, the transport sector is expected to be the second-largest contributor (just after

Total supply includes total energy supply and international bunker fuels.

11. OIL

186

electricity and heat generation) for Spain to reach its climate goals. According to the

National Energy and Climate Plan (NECP), by 2030, total oil consumption in the country

will see a 23% drop, which will support expected emissions cuts from the transport sector

of 31% over the next decade. The transport sector is also the most important consumer of

diesel fuel. Spain expects to deploy up to 5 million electric vehicles by 2030, which would

have a significant impact on the oil sector as a whole.

Spain has eight refineries producing fuels, with a processing capacity of 1.59 mb/d

(79 million tonnes per year), with seven installations located close to seaports, thus

benefiting from easy access to seaborne crude. Spain has been a net exporter of oil

products since 2012, reflecting output from its refineries that exceeds its oil products

demand, particularly in jet and kerosene and gasoline. However, demand for diesel oil is

greater than refinery output.

Supply and demand

Oil accounted for almost half of Spain’s energy supply at 48% (including international

bunker fuels) in 2019 (Figure 11.1). Its share in electricity generation was quite low,

however, with a steady decline from 10% in 2000 to 5% in 2019. Oil accounted for 61% of

Spain’s TFC in 2000, but fell to 51% in 2019. Oil in domestic total energy production has

been negligible, at close to 1% in 2019.

Figure 11.1 Share of oil in energy production, total energy supply, electricity and

total final consumption in Spain, 2000-19

The share of oil in Spain’s total supply, electricity generation and TFC decreased over the

2000-19 period.

* Total supply: share of oil in total energy supply + international bunker fuels.

Note: TFC = total final consumption.

Source: IEA (2021a), IEA World Energy Statistics and Balances (database), www.iea.org/statistics.

Since 2007, oil consumption has decreased gradually in absolute terms, although it has

grown slightly again since 2013 (Figure 11.2). Domestic transport remains the most

important consumer of oil, accounting for 654.5 thousand barrels per day (kb/d) in 2019,

or 51% of total oil consumption. International bunkers are the second-largest consumers

of oil (18% in 2019) at 233.8 kb/d, followed by industry (163.5 kb/d, 13% in 2019), other

energy (77.7 kb/d, 6%), services (70.2 kb/d, 5%), residential (54.3 kb/d, 4%), and power

10%

20%

30%

40%

50%

60%

70%

Domestic energy production Total supply* Electricity generation TFC

Share of oil

2000

2005

2009

2015

2019

11. OIL

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ENERGY SECURITY

and heat generation (48.8 kb/d, 4%). In the past decade, oil consumption has decreased

the most significantly in power and heat generation (-35%), the residential sector (-31%),

and the industry sector (-30%).

Figure 11.2 Oil consumption in Spain by sector, 2000-19

Domestic transport followed by international bunkers account for the largest shares of oil

consumption.

* Services/other includes commercial and public services, agriculture and forestry, fishing, and non-energy use.

Note: kb/d = thousand barrels per day.

Source: IEA (2021a), IEA World Energy Statistics and Balances (database), www.iea.org/statistics.

Spain is almost entirely reliant on crude oil imports and has increased its total imports

progressively since 2011, reaching 1 394.5 kb/d in 2019, with a small but notable reduction

of 3% from 2018. However, the country has also increased its crude oil exports since 2012,

to 58.2 kb/d in 2019 (Figure 11.3) and, as a result, net imports of oil stood at 1 336.4 kb/d

in 2019.

Spain imports from a variety of countries and regions (Figure 11.3). Nigeria was the largest

net exporter of crude oil to Spain at 226 kb/d in 2019, a consistent increase from 154 kb/d

in 2000. In 2019, Spain also registered net imports of crude oil of 191 kb/d from Mexico

and 166 kb/d from Saudi Arabia. Additionally, Spain started importing crude oil from

Kazakhstan in 2010 at 12.9 kb/d, with fluctuating quantities over the past decade, rising to

79 kb/d in 2019.

Spain also registered small amounts of net exports of crude oil, natural gas liquids and

feedstock in 2019, totalling 58 kb/d, of which 11 kb/d went to Brazil, 9 kb/d to the

United States, 8 kb/d to Belgium, 6 kb/d to the Netherlands, and 1 kb/d to Japan and the

People’s Republic of China each.

200

400

600

800

1 000

1 200

1 400

1 600

1 800

kb/d

Other energy

Electricity and heat generation

Services/other*

Residential

Industry

International bunkers

Domestic transport

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Figure 11.3 Spain’s crude oil net imports, 2000-19

Spain’s crude oil imports are well diversified, with Nigeria, Mexico and Saudi Arabia being the

main import sources in 2019.

Notes: kb/d = thousand barrels per day. Crude oil data include crude oil, natural gas liquids and feedstock.

Source: IEA (2021a), IEA World Energy Statistics and Balances (database), www.iea.org/statistics.

In terms of oil products, Spain has ramped up its exports over the past decade, turning to

a net exporter since 2012 (Figure 11.4). Total net trade in Spain was 26 kb/d in 2012 and

55 kb/d in 2019, an increase of over 200%. In 2019, its largest total export markets for oil

products were Morocco (55 kb/d), the United States (45 kb/d), France (44 kb/d), Portugal

(34 kb/d) and Italy (28 kb/d). Spain also imported oil products in 2019 from Italy (60 kb/d),

the United States (55 kb/d), Portugal (21 kb/d), France (17 kb/d) and Saudi Arabia

(12 kb/d).

Figure 11.4 Spain’s oil products imports and exports by country, 2000-19

After its shift from being a net importer of oil products to a net exporter in 2012, Spain’s largest

net exporting markets for oil products were Morocco and France in 2019.

Note: kb/d = thousand barrels per day.

Source: IEA (2021a), IEA World Energy Statistics and Balances (database), www.iea.org/statistics

200

400

600

800

1 000

1 200

1 400

1 600

kb/d

Other

Venezuela

Angola

Brazil

Iran

Iraq

Kazakhstan

Libya

Mexico

Saudi Arabia

Nigeria

Total net trade

-200

-150

-100

-50

100

150

200

250

300

350

400

450

kb/d

Portugal

Sweden

France

Other

Saudi Arabia

Italy

United States

Morocco

Total net trade

Net exports

Net imports

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ENERGY SECURITY

In 2019, refinery output in Spain equalled 1 357 kb/d, above its overall oil products demand

of 1 328 kb/d the same year (Figure 11.5). Spain’s oil products demand surpassed its

production in gas/diesel oil, where demand was at 645 kb/d and output at 552 kb/d.

However, refinery output exceeded demand for the following products: gasoline, jet and

kerosene, and other products.

Figure 11.5 Spain’s oil refinery output and demand, 2019

Spain is self-sufficient in gasoline, jet and kerosene, and other oil products but remains reliant

on imports for its diesel oil consumption.

Notes: LPG = liquid petroleum gas. kb/d = thousand barrels per day.

Source: IEA (2021b), Monthly Oil Data Service, www.iea.org/statistics

Spain’s refinery output is predominantly composed of gas/diesel oil, motor gasoline and

kerosene. In 2019, annual output was 552 kb/d, 210 kb/d and 223 kb/d, respectively, for a

total of 1 357 kb/d of oil products produced (Figure 11.6). Fuel oil production fell from

231 kb/d in 2000 to 89 kb/d in 2019. Kerosene production was as low as 85 kb/d in 2000

and increased continuously over the period.

Figure 11.6 Spain’s oil refinery output, 2000-19

Diesel oil and motor gasoline have consistently been the main products from Spain’s oil

refineries.

Note: kb/d = thousand barrels per day.

Source: IEA (2021a), IEA World Energy Statistics and Balances (database), www.iea.org/statistics

0 100 200 300 400 500 600 700

Other products

Residual fuels

Gas/diesel oil

Jet and kerosene

Gasolines

Naphtha

LPG and ethane

kb/d

Refinery output

Demand

200

400

600

800

1 000

1 200

1 400

1 600

kb/d

Other products

Kerosene

Naphtha

Fuel oil

Liquefied petroleum gases

Motor gasoline excl bio

Gas/diesel oil excl bio

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As a result of the COVID-19 pandemic, demand for oil products shrunk during the

confinement period. In April 2020, oil products demand fell by 51% on average compared

to April 2019. The most significant decrease in sales was observed in kerosene (-93%),

followed by gasoline (-78%) and diesel oil (-42%). One refinery (Tarragona) also stopped

operations for 21 days in April and May 2020 to reduce market oversupply.

Oil market structure

The Spanish oil wholesale market is fully open to competition. Imports, exports, trade and

prices are set on the free market. The government intervenes only to protect competition

and to avoid abuse of a dominant position. The wholesale market is carried out by agents

who supply retailers, who in turn supply final consumers. It also includes the direct sale of

fuels to commercial or industrial customers. The companies that operate in wholesale

markets are either the oil companies that own the refineries (producer operators) or

wholesale fuel operators who import products or buy them from another operator

(non-producer operators), and sell them for retail distribution. However, due to the market

structure and the traditionally dominant role of the largest operators, the wholesale market

is highly concentrated. At the end of 2020, there were more than 90 wholesale operators,

out of which the 3 biggest companies controlled over 50% of the market (Repsol, Cepsa

and BP).

Similarly, the Spanish retail market is also fully open to competition, and trade and prices

are set freely. At the end of 2020, Spain had close to 11 700 filling stations, an increase of

10% from the end of 2013. The retail network has been rather concentrated in the hands

of integrated oil companies, such as Repsol, Cepsa, BP and GALP, but their market share

has decreased from 55% in 2013 to 47% in 2020. In March 2020, 31% of the stations were

dealer owned and dealer operated, a significant reduction from 39% in 2013. Competition

in the retail market was reinforced by Law 11/2013, which strengthened the role of Spain's

National Authority for Markets and Competition (CNMC) in the oil retail market. It also

regulated clauses in exclusive contracts between retailers and major operators, simplified

administrative procedures to set up new filling stations, and capped the market share of

operators at 30% of sales in any province or island.

Oil market policies

The NECP specifies measures to support achieving its objective of reducing oil

consumption by 2030 by 23% compared to 2015 levels and a 31% emissions reduction

target for the transportation sector. They include promoting advanced biofuels in transport,

moving road freight and passenger transport to railways, boosting the deployment of

electric vehicles, as well as promoting modal and alternative transport means.

From an upstream perspective, Spain’s domestic crude oil production has been in a steady

decline in recent years, making the country almost entirely dependent on imports.

Commensurate with the decline, exploration and production activity (E&P) has also slowed

considerably, with no new projects announced in many years. Moreover, the draft Bill on

Climate Change and Energy Transition forbids new E&P projects across Spain, including

offshore projects (Magnus Commodities, 2020).

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ENERGY SECURITY

Mobility

Given the complexity of the challenges that mobility and transport will face in fulfilling

Spain’s oil reduction target as set in the NECP, the Spanish Ministry of Transport, Mobility

and the Urban Agenda considers it imperative to establish a robust dialogue with different

stakeholders to guarantee the success of its regulatory project. It considers the following

areas as priorities for structuring future regulations, mainly via the Bill of Climate Change

and Energy Transition (Pechin, 2020):



transport taxation



financing of urban transport



subsidies and aid to transport



planning and financing of transport infrastructures



regulation to promote sustainable mobility



regulation on raising awareness and training in sustainable mobility



research and innovation in transport and mobility



regulation of logistics and urban distribution of goods



digitisation and automation of transport, including open data



improving the competitiveness of transport and other sectoral measures



instruments for governance and public participation.

In 2019, the total vehicle fleet reached 35.16 million, dominated by diesel vehicles, which

account for 51.6% (18.14 million vehicles) of the total, followed by gasoline at 47.9%

(16.86 million). Electric vehicles (EVs) accounted for a miniscule share at 0.2%

(81 316 vehicles), having grown by 57.1% from 2018. Within the electric fleet, 57% was

made up of passenger cars and light-duty cargo vehicles, and 43% by motorcycles and

mopeds.

The Plan MOVES I, established by Royal Decree 132/2019, and the more recent Plan

MOVES II, established by Royal Decree 569/2020, have incentivise efficient and

sustainable mobility. The measures provide economic incentives for buying electric and

fuel cell vehicles and for the installation of EV charging stations, among other measures.

According to the government’s plans, the deployment of EVs in Spain is set to surge to

5 million EVs on the roads in 2030. To develop adequate public charging infrastructure,

the Bill on Climate Change and Energy Transition makes it obligatory to install high-voltage

chargers at each petrol station with yearly sales exceeding 5 million litres of fuels.

Furthermore, the bill envisages a binding target to create low-emissions zones in all cities

of 50 000 inhabitants or more. It also assumes a 35% reduction of passenger traffic in

urban areas by 2030 and foresees a considerable shift of passenger and cargo transport

to railways. Rail transport accounted for just 4% of total passenger and cargo transport

in 2020 in Spain, while in Germany it surpassed 17%.

Among the measures of the planned regulation, the following stand out: apply green

taxation in transport; establish a financing system for public transport based on stable,

predictable and proportionate criteria; develop a governance model that allows for the

coherent design of mobility policies; steer innovation and digitisation in transport and

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logistics; and move towards a sustainable transport and mobility model. All of these efforts

combined with effective taxation of fossil fuels use (vehicle circulation tax, excise duty,

value-added tax and regional taxes), aim at disincentivising the use of fossil fuels,

especially diesel oil, and the creation of more advanced modal shifts in transport. The

government’s ambition is that in 2040, all new cars will be emissions-free vehicles, which

will entail a complete overhaul of the fleet and supporting infrastructure (EV charging,

hydrogen). The average age of a passenger car in Spain in 2020 was 12 years.

Biofuels

Spain has made efforts to increase the share of renewables in the transport sector. Royal

Decree 1085/2015 established targets for the proportion of biofuels consumption for the

years 2016-20 at 4.3%, 5%, 6%, 7% and 8.5%, respectively, in order to reach the

objectives of EU Directive 20098/CE. The target for 2021 was set at 9.5% and increases

to 10% for 2022. The regulation also introduced an indicative objective of 0.1% energy

content for advanced biofuels in 2020.

Obligated entities (wholesalers and retailers or consumers) in Spain may choose to fulfil

blending requirements up to 30% with certificates transferred from the previous year, or

up to 50% of the obligation can be covered with compensatory payments amounting to

EUR 763 for one certificate (1 toe of biofuels equals 1 certificate). In 2019, consumption

of biofuels in Spain amounted to 2.8 million cubic metres (m

The Ministry for the Ecological Transition and the Demographic Challenge (MITERD) is

working to transpose the second EU Renewables Directive into Spanish legislation, which

establishes a final objective for the penetration of renewables in transport of 14% in 2030.

The NECP envisages achieving a 28% share of renewables (including electricity) in the

transport sector by 2030 (double the EU’s ambition). It foresees a greater role for biofuels

resulting from much higher blending targets, but for that to happen, the government needs

to address the issue of security of supply of biofuels. Domestic production of biofuels

currently stands at 52% of demand for bio-esters and 96% for bioethanol. Nevertheless,

only 5% of raw material for bio-esters and 21% for bioethanol production comes from

indigenous sources, while the remaining shares are imported, mostly from Indonesia.

Spain may choose to reduce import dependency of biofuels by increasing domestic

production of hydrotreated vegetable oil and advanced biojet fuel from wastes and used

cooking oil at refineries, which will anyway have to gradually reduce throughputs of crude

in the years to come in line with falling demand.

Prices and taxation

Fuel prices in Spain are below the IEA average in general. Automotive diesel was priced

at 1.23 USD/L (tax share of 53%) during the third quarter of 2020, and is the 14th lowest

among IEA countries (Figure 11.7).

Unleaded gasoline was priced at 1.36 USD/L during the same period, and was the 11th

lowest among IEA countries, with the share of taxes at 58% (Figure 11.8).

Light fuel oil was at 0.63 USD/L with a relatively high tax share at 35%, and ranked eighth

lowest among IEA member countries (Figure 11.9).

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ENERGY SECURITY

Article 38 of Law 34/1998 on the Hydrocarbons Sector (Government of Spain, 2020a)

establishes that oil products prices in Spain are freely established by retailers and

operators. However, there are some exceptions included in the law that apply to prices of

specific formats of liquefied petroleum gases (LPG). These are: LPG in bottles of 8-20 kg,

excluding LPG for motor vehicles; LPG in individual tanks for end users; and LPG in bulk

purchases for LPG distributors.

Due to low taxes on LPG, Spain has seen rather significant development of personal cars

and light-duty vehicle conversions to LPG in recent years, leading to the opening of

700 new LPG filling stations in 2019.

The Spanish administration has also launched a website on which customers can verify

fuel prices across the country in real time

. There are plans to include hydrogen and EV

charging prices to this system, adding to market transparency and the promotion of green

mobility.

The subsidies and incentives for consumption of oil products in Spain are described in

Law 38/1992 on Special Taxes (Government of Spain, 2020b). Aside from the LPG pricing

exceptions described above, subsidies are divided into three categories:



tax exemptions for gasoil used in electricity production and other uses such as navigation

and rail transport, kerosene for air transport, and fuel oil for electricity production



tax reductions for gasoil for some engine types (including farm tractors)



partial tax refunds for road transport activities including freight transport, taxis and some

regular passenger transport as well as for agriculture and farmers.

https://geoportalgasolineras.es/#/Inicio

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Figure 11.7 Price comparison for automotive diesel in the IEA, Q3 2020

Figure 11.8 Price comparison for unleaded gasoline in the IEA, Q3 2020

Figure 11.9 Price comparison for light fuel oil in the IEA, Q3 2020

Automotive diesel, unleaded gasoline and light fuel oil prices in Spain are below most IEA

countries.

Notes: Automotive diesel data are not available for Mexico. Unleaded gasoline data are unavailable for Japan and

Mexico. Light fuel oil data are unavailable for Australia, Greece, Hungary, Mexico, New Zealand, Norway, the

Slovak Republic and Sweden.

Source: IEA (2020c), Energy Prices and Taxes Third Quarter 2020 (database), www.iea.org/statistics

The subsidies for oil products in 2019 amounted to an estimated EUR 1 087 billion, close

to 50% of which went to the farming sector in the form of subsidies for fuel used for

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

USD/L

Tax component

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

USD/L

Tax component

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

USD/L

Tax component

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ENERGY SECURITY

agricultural production (agriculture fuel is available at separate filling stations, which are

not evenly accessible throughout the country); an additional one-fourth were tax

exemptions for kerosene used in air transport (Congress of Deputies, 2020).

Oil infrastructure

Pipelines and storage

Spain enjoys a unique oil infrastructure system with wide geographic and interconnecting

coverage, including 11 oil port terminals, an extensive network of pipelines and storage

capacity connected to refineries. The system is owned and operated by the CLH Group

(Compañía Logística de Hidrocarburos). CLH’s liquid hydrocarbons transport and storage

network has 4 006 km of product pipelines (the biggest civil pipeline network in western

Europe) and 39 storage facilities, with a total capacity of 7.9 million m

, in addition to

storage facilities at 37 Spanish airports. It links the 8 peninsular refineries and the main

import ports with 39 storage plants of the companies that serve the mainland. Even though

the system is owned by CLH, third-party access is guaranteed to both logistics and storage

facilities by means of a negotiated procedure; in addition, the prices charged must be made

public. Spain has the highest rate of inland oil transportation via pipelines, with 90% of

primary transport using the network (compared to 11% in Germany that has a similar

pipeline system length).

The Spanish storage system is a competitive market with growing capacity and many

players. There are 41 companies offering storage services in Spain in over 138 sites

(including airports), some of which are subsidiary companies of oil operators. Most of the

storage sites, including the largest ones, are connected to the CLH pipeline network. Total

storage capacity in 2019 was around 29.2 million m

(or 184 million barrels [mb]). Coastal

refineries are the main sites for crude imports and storage. These refineries also import a

substantial share of refined products through nearby ports. Total on-site storage capacity

at the country’s refineries amounts to 8.1 million m

(above 54 mb). The remaining volumes

of refined products are imported directly to inland storage facilities.

Refining

Spain has a large and relatively complex refining industry, with eight refineries to produce

oil products and another one (ASESA, owned by Repsol and Cepsa) for the treatment of

heavy crudes to produce asphaltic or paving bitumen. Additionally, the Cepsa refinery in

Tenerife stopped distillation activities in 2018, but has served as a storage site to secure

undisrupted supplies for the Balearic Islands. Repsol has five refineries (Bilbao-Petronor,

Cartagena, La Coruña, Puertollano and Tarragona), Cepsa has two (Algeciras and

Huelva) and BP has one (in Castellon). The total nameplate capacity is 1.59 mb/d

(79 million tonnes per year) and the average utilisation rate reached 84.2% in 2019, slightly

lower than in the previous year (88.0%). Eight of the nine refineries are located on the

coast and easily supplied by ship. Only Repsol’s Puertollano refinery is located inland and

supplied with crude oil by a 358 km pipeline linked to the port and refinery in Cartagena.

In view of the NECP’s plans, refineries will have to face a major transformation of their

business activities due to a foreseen sharp reduction of oil consumption in the country.

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Figure 11.10 Map of the Spanish oil infrastructure

Source: Spanish administration’s response to the IEA questionnaire.

Oil emergency policies and organisation

Spain has a robust and proven system of oil emergency preparedness based on a

stockholding obligation for public and private entities (see next section), high-quality data

and accuracy of market data reporting, regularly conducted emergency response

exercises, and strong institutions. Maintaining this system is key to ensuring the

emergency response capabilities of the country, especially in anticipation of profound

changes to oil consumption over the next decade.

Law 34/1998 on the Hydrocarbons Sector, along with Royal Decree 1716/2004 regulating

the obligation to maintain minimum security stocks, the diversification of natural gas

supplies and the Corporation of Strategic Reserves of Oil Products (CORES), as amended

by Royal Decree 984/2015, constitute the two most important pieces of legislation. They

provide the Spanish government with powers to guarantee that oil stocks in the country

are sufficient to meet the IEA’s and EU’s requirements and that it can draw stocks in case

of a domestic or international emergency.

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ENERGY SECURITY

Within MITERD, the Directorate General for Energy Policy and Mines is ultimately

responsible for managing the oil security of the country.

The Spanish National Emergency Strategy Organisation is part of the country’s general

emergency structure: the National Security System. According to the National Energy

Security Strategy of 2015, the National Emergency Strategy Organisation reports to the

National Security Council of Spain, which is the highest decision-making body of the

National Security System and the principal advisory body used by the Prime Minister for

considerations of national security and foreign policy issues. Oil emergencies fall into the

category of national security matters according to these provisions.

In December 2013, CORES was appointed central stockholding entity as defined in EU

Directive 2009/119/EC. The agency’s foremost activity is to set, maintain and manage

strategic stocks of crude oil and oil products. CORES is a non-profit public corporation

under the aegis of MITERD. It is a separate legal entity, operating under private law.

CORES finances its activities by collecting a periodic fee from operators, distributors and

consumers obliged to keep security stocks (collected monthly).

CORES is also responsible for data collection of the hydrocarbons sector in Spain,

providing comprehensive data and analysis to the government, market stakeholders and

international institutions, including the IEA and Eurostat. The agency’s digital data

platform, InfoCores, is accessible by all market participants and allows gathering and

processing market data without delays.

In case of an oil supply disruption, the Directorate General for Energy Policy and Mines,

together with CORES, plays a major role by providing technical support between the

administration and industry to smoothly co-ordinate emergency stocks releases. In case

of a disruption, CORES’ Contingency Plan, a document of more than 200 pages, serves

as a manual to help guide the decision-making process. It comprises procedures, draft

decisions, contact details and specificities of the stockholding system. It was developed

in 2018 through co-operation with all companies and the ministry. The document is

classified.

In 2018, Spain also concluded a first draft of the updated Handbook for Stocks Release in

case of an emergency, with the objective of making it suitable for new market conditions

as well as to review procedures and protocols and include new useful content (the previous

update was in 2015 with minor changes and the preceding one was in 2011). The new

draft distinguishes primarily between national and international crises.

Spain has also approved a confidential document entitled “Demand Restriction Measures

Plan against Oil Market Crisis”, in co-ordination with other relevant ministries. The plan

defines several scenarios based on previous security of supply crises, such as Hurricanes

Katrina and Rita, the Iraq war and the Gulf Crisis in 1991, as well as local supply disruption

scenarios. It constitutes an additional set of measures to react to oil supply distortions.

CORES, in collaboration with MITERD, has to date carried out four national emergency

exercises: in October 2013, October 2015, January 2018 and November 2019. Following

previous recommendations from the IEA, the objective of these exercises was to assess

the Spanish oil market resilience in case of a supply disruption.

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Emergency oil stocks

The Law on Hydrocarbons sets a maximum level of emergency stocks of 120 days of

annual imports or consumption of crude oil and/or oil products. It also specifies that the

minimum level of oil stocks should correspond to at least 92 days of sales or consumption

in the previous year. In addition, companies active in the LPG sector are obliged to store

20 days of stocks of this fuel.

The minimum obligation of 92 days is split between CORES, which is responsible for

maintaining strategic stocks to the tune of 42 days, and industry, which has an obligation

of 50 days. Industry maintains the so-called minimum security stocks and CORES

oversees the strategic (public) stocks. The industry can request CORES to maintain

additional days up to 100% of a given company’s obligation in exchange for a fee and

according to storage availability. CORES does not maintain stocks of LPG; the full

obligation in this regard lies with the industry. CORES is also responsible for monitoring

compliance with the minimum stock levels of industry for oil, LPG and natural gas.

CORES owns 7.3 million m

of oil strategic stocks, which are held in the form of diesel oil

(54%), crude oil (31%), gasoline (8%), and the remainder in kerosene and fuel oil,

reflecting the country’s consumption. Strategic stocks are distributed in five areas based

on the consumption needs of each region: 50% of stocks are held in the eastern region,

17% in central region, 15% in the northern and 14% in southern regions of the country.

Almost 95% of CORES’ stocks are held mostly within the oil and logistic operators’

facilities, whether separated or commingled, according to storage agreements, as well as

in its own facilities at the Puertollano and Cartagena refineries.

The industry-obligated stocks are composed of middle distillates (42%), crude oil (25%),

gasoline (10%), fuel oil (9%) and other legally permitted oil products. Industry’s stocks may

be held outside of Spanish territory up to a level of 40% of a given company’s obligation,

but not exceeding 15% of the country’s total stocks. Holding stocks abroad is allowed only

in those countries with which the government has concluded intergovernmental

agreements. In 2019, 96% of industry stocks were held within the national territory.

As of end October 2020, Spain had a stock level equivalent to 115 days of the country’s

net imports, exceeding the IEA’s 90-day requirements (Figure 11.11). Industry stocks

accounted for 71 days, while public stocks totalled 44 days. Stocks held abroad amounted

to two days. Spain’s emergency stocks have consistently been above the IEA 90-day

requirement in past years.

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ENERGY SECURITY

Figure 11.11 Spanish oil stocks, as of end November 2020

Spain’s emergency stocks have consistently been above the IEA requirements in recent

years.

Source: IEA (2021b), Monthly Oil Data Service, www.iea.org/statistics.

Assessment

The Spanish oil sector is entering a period of profound transformation due to the

implementation of the country’s NECP. The transport sector, which accounts for over 50%

of the country’s total oil consumption and 80% of diesel oil use, is expected to be the

second-largest contributor for reaching the climate objectives as set in the NECP, just after

power generation. The NECP envisages achieving a 28% share of renewables (including

electricity) in the transport sector by 2030 (double the EU’s ambition in this regard),

increasing from today’s 7%; and a 23% reduction in total oil consumption, which will

support expected emissions cuts from the transport sector by 31% over the next decade.

Although the NECP’s objectives have not yet been transposed into binding domestic

legislation, all market stakeholders are advanced in preparing for the swift transformation.

In fact, refiners see new business opportunities in pursuing energy efficiency, producing

green hydrogen and eco fuels. As efforts that companies will have to make could

jeopardise market stability, the Spanish government can be commended for providing very

clear communication on its climate objectives thus far.

Consumption of oil in Spain has been on a slow but steady rise since 2013 and amounted

to 1 295.1 kb/d in 2019. In 2019, oil accounted for 48% of Spain’s total energy supply and

51% of total final energy consumption. With very insignificant domestic oil production, the

country is over 99% reliant on oil imports, which stood at 1 336.4 kb/d in 2019.

Spain’s refining sector is large and relatively complex. Out of nine functioning refineries

with nameplate processing capacity of 1.59 mb/d (an increase of 9% since 2014), five are

operated by the country’s largest oil company, Repsol, while two belong to Cepsa and one

to BP. With the exception of one refinery in Puertollano, all installations are located close

to seaports, thus benefiting from easy access to seaborne crude. In 2019, close to 42% of

the country’s 1 357 kb/d of oil of refinery output was diesel oil.

100

120

140

Abroad public

Abroad industry

Industry domestic

Public domestic

IEA 90-day

obligation

Days of net import

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The Spanish wholesale and retail oil markets are fully open to competition. Imports,

exports, trade and prices are set on the free market. However, due to the market’s structure

and the traditionally important role of the biggest operators, both the wholesale and retail

markets are highly concentrated. Out of the 90 wholesale operators, the 3 biggest

companies control 50% of the market. Similarly, the first four operators in the retail market

control around 60% of petrol stations. The IEA commends the government of Spain for

reducing market concentration since the last in-depth review thanks to actions led by the

CNMC. The CNMC has strictly observed provisions abolishing pricing agreements of

dealer owned and dealer operated service stations and prevented market dominance by

restricting retail concentration to a maximum of 30% of sales by one operator in a given

administrative region. Access to the market for new entrants is also simplified with

third-party access rights to the infrastructure and publicly known pricing for their services.

Fuel prices in Spain are below the IEA average due to relatively low taxation. There are

also regulated prices that apply only to specific formats of LPG, which is treated in the

country as an alternative to natural gas for heating and cooking, notably in areas where

the natural gas network is unavailable, such as islands and rural areas. Tax exemptions

are granted for some types of diesel oil consumption, including for agriculture, road freight

and taxi services, and the government will have to review these provisions to promote

alternative fuels.

Mandatory blending targets for biofuels were introduced into Spanish law in 2015 with an

initial goal of 4.3% for 2016. Since then, the government has made significant progress by

steadily expanding the target, which stands at 10% for the year 2022. As of January 2021,

MITERD has assumed the role of biofuel certification body (previously exercised by the

CNMC) to ensure both timely implementation of blending targets and the development of

a certificates scheme. Although the NECP envisages a greater role for biofuels to achieve

the NECP’s target of 28% of renewables in the transport sector by 2030, only 5% of raw

material for bio-esters and 21% for bioethanol production comes from indigenous sources;

the remaining shares are imported.

According to the government’s plans, the deployment of electric vehicles in Spain is set to

surge to 5 million EVs on the roads in 2030. In 2019, the total vehicle fleet in Spain passed

35 million and was dominated by diesel vehicles, accounting for 51.6% of the total. EVs

accounted for a small share at 0.2%. Tools to support purchases of EVs are being

implemented, but will require further enhancement, mainly as they relate to charging and

related infrastructure throughout the country to support attainment of the targets.

Spain has a robust and proven system of oil emergency preparedness, based on a

stockholding obligation, high-quality data and accuracy of market data reporting, regularly

conducted emergency response exercises, and strong institutions. Maintaining this system

is key to ensuring Spain’s emergency response capabilities.

The minimum obligation of 92 days of oil stocks as set by the national legislation is split

between the national stockholding agency, CORES, which is responsible for maintaining

strategic stocks to the tune of 42 days, and industry, which has an obligation of 50 days.

CORES does not maintain stocks of LPG and the full obligation in this regard lies with the

industry. CORES is also responsible for monitoring compliance with the minimum stock

levels of industry for oil, LPG and natural gas.

CORES is not financed by the state budget, but instead collects revenues from market

participants to finance its stockholding, monitoring and data collection activities.

11. OIL

201

ENERGY SECURITY

The revenues are collected via a fee on the monthly sales of the market participants and

therefore vary month by month. As CORES hardly has any financial buffers, the fees for

oil and gas suppliers had to be substantially increased when monthly sales considerably

dropped during the COVID-19 pandemic.

Spain has a unique logistical system of pipelines and storages for crude oil and petroleum

products, owned and operated by the company CLH. Thanks to Europe’s second-longest

pipeline system (over 4 000 km of pipelines), 90% of oil is transported via the network,

which is the highest share among IEA countries. Pipelines connect all 8 refineries with

39 storage depots and another 37 storage sites serving main airports. The central

dispatching unit at Torrejón supports, manages and supervises the automatic systems in

all installations. According to the latest IEA data, Spain has a rather low utilisation rate of

its storage system (60% for crude oil and 68% for products).

The Spanish National Emergency Strategy Organisation is part of the country’s general

emergency structure: the National Security System. According to the National Energy

Security Strategy, the National Emergency Strategy Organisation reports to the National

Security Council, which is the highest decision-making body of the National Security

System. In case of an oil supply disruption, the Directorate General for Energy Policy and

Mines within MITERD and CORES play a major role by providing technical support to

smoothly co-ordinate emergency stock releases.

Since the last in-depth review, Spain has also updated its emergency operational

handbook (in December 2018), which together with the ministry’s Demand Restraint

Measures Plan and CORES’s Contingency Plan (all classified documents) comprise the

guidelines for acting during any kind of oil market emergency.

All of these changes will have profound effects on the level of oil stockholding, utilisation

of related infrastructure, including refineries, and may trigger a fundamental market

rearrangement. It is critically important that changes to the oil emergency system are

discussed with all stakeholders before implementation. Security of supply during the

energy transition needs to be maintained and is key for achieving its goals in an orderly

manner.

Recommendations

The government of Spain should:

 Conduct timely dialogue with oil industry stakeholders to support their endeavours in

adapting to the changing business environment in view of implementation of the

NECP’s objectives.

 Ensure effective co-ordination of implementation of the NECP with all 17 autonomous

communities to develop the infrastructure for clean alternatives for the transport sector

throughout the country.

 Strengthen sustainability criteria for biofuels used in Spain and ensure sufficient

measures to increase advanced biofuels penetration.

 Enhance public campaigns that promote acceptance of electric vehicles and new

commuting models in public transport.

11. OIL

202

 Ensure the continuous operational stability of CORES, thereby providing for the stable

functioning of CORES both in normal and emergency situations.

 Provide the conditions for a stable development of sustainable biofuels, with a

particular emphasis on reducing dependency on imports and promoting domestic

production.

References

Congress of Deputies (2020), Memoria de Beneficios Fiscales [Tax Benefits Report],

Presupuestos Generales del Estado, Congress of Deputies, Madrid,

www.congreso.es/docu/pge2019/pge_2019-tomos/PGE-ROM/doc/L_19_A_A2.PDF

(accessed on 15 November 2020).

EC (European Commission) (2020), Integrated National Energy and Climate Plan

2021-2030, https://ec.europa.eu/energy/sites/ener/files/documents/es_final_necp_main_en.

pdf.

Government of Spain (2020a), Law 34/1998 of 7 October of the Hydrocarbons Sector (last

modification by Law 8/2015), Official Gazette, Madrid, www.hylaw.eu/database/national-

legislation/spain/law-34-1998-of-7-october-of-the-hydrocarbons-sector-1274.

Government of Spain (2020b), Law 38/1992 of 28 December on Excise Duties, Offical

Gazette, Madrid, www.hylaw.eu/database/national-legislation/spain/law-38-1992-of-28-

december-on-excise-duties.

IEA (International Energy Agency) (2021a), “World energy statistics”, IEA World Energy

Statistics and Balances (database), www.iea.org/statistics.

IEA (2021b), Monthly Oil Data Service, www.iea.org/statistics.

IEA (2021c), Energy Prices and Taxes Third Quarter 2020 (database),

www.iea.org/statistics.

Magnus Commodities (2020), The New Law on Climate Change and Energy Transition,

Magnus Commodities, www.magnuscmd.com/the-new-law-on-climate-change-and-energy-

transition (accessed on 7 December 2020).

Pechin, S. (2020), “Spain opens a participation process to draft the new Sustainable

Mobility Law”, Eltis, www.eltis.org/in-brief/news/spain-opens-participation-process-draft-

new-sustainable-mobility-law (accessed on 10 October 2020).

203

ANNEXES

ANNEX A: Organisations visited

Review criteria

The Shared Goals, which were adopted by the IEA Ministers at their 4 June 1993 meeting in Paris, provide

the evaluation criteria for the in-depth reviews (IDRs) conducted by the International Energy Agency (IEA).

The Shared Goals are presented in Annex C.

Review team and preparation of the report

The IEA’s in-depth review team conducted a virtual review of Spain from 28 September to 9 October

2020. The team met with government officials, energy companies, interest groups, research institutions,

and other organisations and stakeholders. This report was drafted on the basis of the review team’s

preliminary assessment of the country’s energy policy and information on subsequent policy

developments from the government and private sector sources. The members of the team were:

IEA member countries

Ms. Angelina Avgeropoulou, United Kingdom (team leader)

Mr. Ignacio Perez Caldentey, European Commission

Mr. Cristina Cardoso, Portugal

Ms. Malene Hein Nybroe, Denmark

Mr. Kathrin Renz, Austria

Mr. Wieger Wiersema, Netherlands

OECD Nuclear Energy Agency

Mr. Hiroyuki Goto

IEA Secretariat

Mr. Simon Bennett

Mr. Aad van Bohemen

Mr. Milosz Karpinski

Mr. Luis Munuera

Ms. Divya Reddy

The team is grateful for the co-operation and assistance of the many people it met throughout the visit.

Thanks to their kind hospitality, openness and willingness to share information, the virtual visit was highly

informative, productive and enjoyable. The team expresses particular gratitude to the Ministry for the

Ecological Transition and the Demographic Challenge for organising the visit and for all its support

throughout the review process, especially Carlos Jose Ortiz Bermuda and Jose Luis Cabo Sánchez.

ANNEXES

204

The team is also sincerely grateful to Mr. Hugo Lucas Porta, Director of Cabinet, Secretary of State for

Energy, for meeting with the review team.

Divya Reddy managed the review visit process and drafted the report, with the exception of Chapter 6,

which was prepared by Simon Bennett and Luis Munuera of the IEA; Chapter 8, drafted by Hiroyuki Goto

of the Nuclear Energy Agency; and Chapter 11, which was prepared by Milosz Karpinski of the IEA.

The report was prepared under the guidance of Aad van Bohemen, Head of the IEA’s Energy Policy and

Security Division. Helpful comments and updates were provided by the review team members and IEA

staff, including Yasmina Abdeliliah, Carlos Fernández Alvarez, Heymi Bahar, Alyssa Fischer,

Randi Kristiansen, Luca Lo Re, Jinsun Lim, Sara Moarif and Gergely Molnar.

Bomi Kim, Clémence Lizé, Alessio Scanziani and Dahyeon (Lisa) Yu managed the data and prepared

the figures. Roberta Quadrelli, Erica Robin, Stève Gervais, Jungyu Park and Pouya Taghavi-Moharamli

provided support on statistics. Therese Walsh managed the editing process, Jennifer Allain copy edited

the report, Tanya Dyhin managed the design process,Astrid Dumond managed the production process,

Isabelle Nonain-Semelin and Clara Vallois finalised the production. Jad Mouawad and Jethro Mullen

supported the press launch.

Organisations visited

During its virtual meetings with Spain, the review team met with the following organisations:

A3e, Spanish Association of Energy Efficiency Companies

ACOGEN, Spanish Association of Co-generation

AEDIVE, Iberian Association for Electromobility

AEE, Spanish Wind Association

AEH2, Spanish Hydrogen Association

AELEC, Spanish Association of Electric Power Companies

ALINNE, Alliance for Energy Research and Innovation

ANESE, National Association of Energy Service Companies

ANFAC, Spanish Association of Auto and Truck Makers

AOP, Spanish Association of Petroleum Products Operator

APPA, Spanish Renewables Association

Atecyr, Spanish Technical Association for Air Conditioning and Refrigeration

CDTI, Centre for Industrial Technological Development

CIEMAT, Centre for Energy, Environment and Technology

CNMC, National Commission on Markets and Competition

CORES, central stockholding entity

Ecologistas en Acción

EDP

Enagás

Endesa

ANNEXES

205

ANNEXES

Enresa

Greenpeace Spain

Grupo Hunosa

Iberdrola

Ministry for the Ecological Transition and the Demographic Challenge

Ministry of Finance

Ministry of Science and Innovation

Ministry of Transport, Mobility and Urban Agenda

OMIE, electricity market operator

Protermosola

Red Eléctrica

Sedigas

Spanish State Research Agency

UNEF, Spanish Solar Association

ANNEXES

206

ANNEX B: Energy balances and key statistical data

Unit: Mtoe

SUPPLY

1973 1990 2000 2010 2017 2018 2019

TOTAL PRODUCTION 11.3 34.6 31.5 34.4 33.6 34.0 34.1

Coal

6.5 11.7 8.0 3.3 1.1 0.9 -

Peat

- - - - - - -

Oil

0.7 1.2 0.2 0.1 0.1 0.1 0.0

Natural gas

0.0 1.3 0.1 0.0 0.0 0.1 0.1

Biofuels and waste

0.0 4.1 4.1 6.3 8.1 8.1 8.4

Nuclear

1.7 14.1 16.2 16.2 15.1 14.5 15.2

Hydro

2.5 2.2 2.4 3.6 1.6 3.0 2.1

Wind

- 0.0 0.4 3.8 4.2 4.4 4.8

Geothermal

- 0.0 0.0 0.0 0.0 0.0 0.0

Solar/other

- 0.0 0.0 1.0 3.4 2.9 3.4

TOTAL NET IMPORTS

41.7 55.6 91.0 95.0 90.2 89.5 88.7

Coal Exports

0.0 0.0 0.5 1.1 0.2 0.3 1.0

Imports

2.1 7.1 13.3 7.8 11.2 9.5 5.5

Net imports

2.1 7.1 12.8 6.7 10.9 9.2 4.5

Oil Exports

4.3 12.1 7.5 11.5 27.1 25.1 23.6

Imports

45.3 61.7 78.5 80.5 89.7 88.9 88.1

Int'l marine and aviation bunkers

-2.2 -4.7 -8.7 -11.4 -11.1 -11.6 -11.8

Net imports

38.8 44.9 62.3 57.6 51.5 52.3 52.6

Natural gas Exports

- - - 1.0 2.5 2.8 1.0

Imports

0.9 3.7 15.5 32.0 30.1 30.3 32.4

Net imports

0.9 3.7 15.5 31.0 27.6 27.5 31.4

Electricity Exports

0.2 0.3 0.7 1.2 1.3 1.1 1.0

Imports

0.0 0.3 1.1 0.4 2.0 2.1 1.6

Net imports

-0.2 -0.0 0.4 -0.7 0.8 1.0 0.6

TOTAL STOCK CHANGES -1.5 -0.2 -1.1 -2.2 1.7 1.6 -1.4

TOTAL SUPPLY (TES)

51.6 90.1 121.4 127.3 125.6 125.0 121.4

Coal

9.0 19.3 20.9 7.8 12.8 11.3 4.9

Peat

- - - - - - -

Oil

37.6 45.5 61.6 57.7 52.9 52.9 51.5

Natural gas

0.9 5.0 15.2 31.1 27.3 27.1 30.9

Biofuels and waste

0.0 4.1 4.1 6.7 7.6 8.0 8.0

Nuclear

1.7 14.1 16.2 16.2 15.1 14.5 15.2

Hydro

2.5 2.2 2.4 3.6 1.6 3.0 2.1

Wind - 0.0 0.4 3.8 4.2 4.4 4.8

Geothermal

- 0.0 0.0 0.0 0.0 0.0 0.0

Solar/other

- 0.0 0.0 1.0 3.4 2.9 3.4

Electricity trade

-0.2 -0.0 0.4 -0.7 0.8 1.0 0.6

Shares in TES (%)

Coal

17.4 21.4 17.3 6.1 10.2 9.0 4.0

Peat

- - - - - - -

Oil 72.9 50.5 50.8 45.3 42.1 42.3 42.4

Natural gas 1.8 5.5 12.5 24.5 21.7 21.7 25.4

Biofuels and waste

- 4.5 3.4 5.3 6.0 6.4 6.6

Nuclear 3.3 15.7 13.4 12.7 12.0 11.6 12.5

Hydro 4.8 2.4 2.0 2.9 1.3 2.4 1.7

Wind - - 0.3 3.0 3.4 3.5 3.9

Geothermal - 0.0 0.0 0.0 0.0 0.0 0.0

Solar/other

- 0.0 0.0 0.8 2.7 2.3 2.8

Electricity trade

-0.3 - 0.3 -0.6 0.6 0.8 0.5

0 is negligible, - is nil, .. is not available, x is not applicable. Please note: rounding may cause totals to differ from the sum of the elements.

ANNEXES

207

ANNEXES

Unit: Mtoe

DEMAND

FINAL CONSUMPTION 1973 1990 2000 2010 2017 2018 2019

TFC

38.5 60.8 85.5 92.1 84.0 86.0 85.5

Coal

4.2 3.4 1.4 0.9 0.9 0.7 0.5

Peat

- - - - - - -

Oil

28.9 38.3 52.2 50.0 42.8 43.8 43.9

Natural gas

0.4 4.3 12.3 14.8 13.9 14.7 14.7

Biofuels and waste

- 3.9 3.4 5.2 5.5 5.9 6.0

Geothermal

- 0.0 0.0 0.0 0.0 0.0 0.0

Solar/other

- 0.0 0.0 0.2 0.3 0.3 0.3

Electricity

5.1 10.8 16.2 21.0 20.6 20.5 20.2

Heat

- - - - - - -

Shares in TFC (%)

Coal 10.8 5.6 1.6 1.0 1.0 0.9 0.6

Peat - - - - - - -

Oil 74.9 63.0 61.0 54.3 51.0 50.9 51.3

Natural gas 1.2 7.1 14.4 16.1 16.6 17.1 17.2

Biofuels and waste

- 6.5 4.0 5.6 6.5 6.9 7.0

Geothermal - 0.0 0.0 0.0 0.0 0.0 0.0

Solar/other

- 0.0 0.0 0.2 0.4 0.4 0.4

Electricity 13.2 17.8 19.0 22.9 24.5 23.8 23.6

Heat - - - - - - -

TOTAL INDUSTRY

20.6 25.2 34.0 27.8 24.3 25.1 25.0

Coal

3.6 2.8 1.1 0.6 0.7 0.5 0.3

Peat - - - - - - -

Oil

13.3 11.4 14.6 11.5 7.2 7.6 7.7

Natural gas

0.4 3.8 9.6 8.2 8.0 8.8 8.9

Biofuels and waste

- 1.8 1.3 1.1 1.4 1.5 1.6

Geothermal

- - - - - - -

Solar/other

- - - 0.0 0.0 0.0 0.0

Electricity

3.3 5.4 7.4 6.3 7.0 6.8 6.5

Heat

- - - - - - -

Shares in total industry (%)

Coal 17.5 11.1 3.3 2.2 2.8 2.1 1.4

Peat - - - - - - -

Oil 64.8 45.0 43.0 41.3 29.8 30.2 30.7

Natural gas 1.9 14.9 28.3 29.6 32.9 34.9 35.5

Biofuels and waste

- 7.3 3.8 4.1 5.9 5.8 6.3

Geothermal - - - - - - -

Solar/other

- - - - - - -

Electricity 15.9 21.6 21.6 22.7 28.6 26.9 26.1

Heat - - - - - - -

TRANSPORT

10.9 21.3 30.2 33.9 31.4 32.2 32.6

OTHER

7.1 14.2 21.2 30.4 28.2 28.6 27.9

Coal

0.6 0.6 0.3 0.3 0.2 0.2 0.1

Peat

- - - - - - -

Oil

4.8 6.0 7.8 6.4 5.9 6.2 5.8

Natural gas

0.1 0.5 2.6 6.5 5.8 5.8 5.6

Biofuels and waste

- 2.1 2.1 2.6 2.8 2.8 2.8

Geothermal

- 0.0 0.0 0.0 0.0 0.0 0.0

Solar/other

- 0.0 0.0 0.2 0.3 0.3 0.3

Electricity

1.7 5.1 8.5 14.5 13.3 13.4 13.3

Heat - - - - - - -

Shares in other (%)

Coal 7.7 4.1 1.2 0.8 0.7 0.8 0.5

Peat - - - - - - -

Oil 67.8 41.8 36.6 21.2 21.0 21.6 20.7

Natural gas 0.8 3.8 12.3 21.3 20.4 20.1 19.9

Biofuels and waste

- 14.6 9.7 8.5 9.8 9.6 9.9

Geothermal - 0.0 0.0 0.1 0.1 0.1 0.1

Solar/other

- 0.1 0.1 0.6 1.1 1.1 1.2

Electricity 23.7 35.5 40.0 47.6 47.0 46.8 47.7

Heat - - - - - - -

0 is negligible, - is nil, .. is not available, x is not applicable. Please note: rounding may cause totals to differ from the sum of the elements.

ANNEXES

208

Unit: Mtoe

DEM AND

ENERGY T RANSFORM ATION AND L OSSES 1973 1990 2000 2010 2017 2018 2019

EL EC T RIC I T Y GENERA T I ON

Input (Mtoe) 12.6 33.1 45.6 49.0 46.7 44.6 42.6

Output (Mtoe) 6.5 13.0 19.0 25.7 23.5 23.4 23.3

Output (TWh) 75.7 151.2 220.9 298.3 273.0 272.0 271.0

Output shares (%)

Coal 18.9 40.1 36.6 8.8 17.0 14.2 5.2

Peat - - - - - - -

Oil 33.2 5.7 10.2 5.6 5.8 5.3 4.8

Natural gas

1.0 1.0 9.1 31.8 23.5 21.3 30.9

Biofuels and waste

0.1 0.4 1.0 1.6 2.5 2.5 2.4

Nuclear 8.7 35.9 28.2 20.8 21.3 20.5 21.5

Hydro 38.2 16.8 12.8 14.2 6.7 12.6 9.1

Wind - - 2.1 14.8 18.0 18.7 20.5

Geothermal - - - - - - -

Solar/other

- - - 2.5 5.3 4.7 5.6

TOTAL LOSSES 13.9 29.4 36.4 36.1 40.5 38.0 36.2

of w hich:

Electricity and heat generation

6.1 20.1 26.6 24.2 26.3 23.8 22.4

Other transformation 4.1 3.1 1.8 1.3 2.0 1.9 1.7

Ow n use and transmission/distribution losses 3.7 6.2 8.0 10.7 12.2 12.3 12.1

Statistical differences -0.9 -0.1 -0.5 -1.0 1.2 1.0 -0.3

INDICATORS 1973 1990 2000 2010 2017 2018 2019

GDP (billion 2015 USD) 471.76 737.32 971.13 1197.15 1267.46 1297.26 1322.94

Population (millions) 35.25 39.34 40.55 46.56 46.53 46.73 47.10

TES/GDP (toe/1000 USD)

0.11 0.12 0.13 0.11 0.10 0.10 0.09

Energy production/TES

0.22 0.38 0.26 0.27 0.27 0.27 0.28

Per capita TES (toe/capita) 1.46 2.29 2.99 2.73 2.70 2.68 2.58

Oil supply/GDP (toe/1000 USD)

0.08 0.06 0.06 0.05 0.04 0.04 0.04

TFC/GDP (toe/1000 USD)

0.08 0.08 0.09 0.08 0.07 0.07 0.06

Per capita TFC (toe/capita) 1.09 1.54 2.11 1.98 1.80 1.84 1.82

emissions from fuel combustion (MtCO

)

139.4 202.6 278.6 262.1 254.0 248.9 230.9

emissions from bunkers (MtCO

)

6.9 14.9 27.3 35.9 34.6 36.2 37.1

GROWTH RATES (% p e r ye ar ) 73-90 90-00 00-10 10-16 16-17 17-18 18-19

TES 3.3 3.0 0.5 -1.1 5.2 -0.5 -2.9

Coal 4.6 0.8 -9.4 5.2 21.5 -12.1 -56.7

Peat - - - - - - -

Oil 1.1 3.1 -0.7 -2.3 5.4 0.1 -2.7

Natural gas 10.3 11.8 7.4 -3.6 8.9 -0.7 14.1

Biofuels and w aste

40.2 0.2 5.0 1.1 5.5 5.7 0.3

Nuclear 13.3 1.4 -0.0 -0.9 -1.0 -3.9 4.6

Hy dro -0.7 1.0 4.1 -2.5 -49.7 87.4 -28.2

Wind - 82.3 25.1 1.7 0.5 3.6 9.3

Geothermal - 2.3 12.3 2.9 - - -

Solar/other

- 4.6 41.1 20.6 5.4 -13.1 16.2

TFC 2.7 3.5 0.7 -1.9 2.4 2.5 -0.6

Electricity consumption 4.6 4.1 2.6 -0.9 2.8 -0.3 -1.6

Energy production 6.8 -0.9 0.9 -0.1 -1.6 0.9 0.5

Net oil imports 0.9 3.3 -0.8 -2.4 3.7 1.5 0.7

GDP 2.7 2.8 2.1 0.5 2.9 2.4 2.0

TES/GDP 0.7 0.2 -1.6 -1.5 2.3 -2.7 -4.8

TFC/GDP 0.1 0.7 -1.3 -2.4 -0.5 0.2 -2.6

0 is negligible, - is nil, .. is not available, x is not applicable. Please note: rounding may cause totals to diff er f rom the sum of the elements.

ANNEXES

209

ANNEXES

Footnotes to energy balances and key statistical data

1. Biofuels and waste comprise solid biofuels, liquid biofuels, biogases, industrial waste and municipal

waste. Data are often based on partial surveys and may not be comparable between countries.

2. Other includes tide, wave and ambient heat used in heat pumps.

3. In addition to coal, oil, natural gas and electricity, total net imports also include peat, biofuels and

waste, and trade of heat.

4. Excludes international marine bunkers and international aviation bunkers.

5. Total supply of electricity represents net trade. A negative number in the share of total primary energy

supply indicates that exports are greater than imports.

6. Industry includes non-energy use.

7. Other includes residential, commercial and public services, agriculture/forestry, fishing, and other

non-specified.

8. Inputs to electricity generation include inputs to electricity, co-generation and heat plants. Output

refers only to electricity generation.

9. Losses arising in the production of electricity and heat at main activity producer utilities and

autoproducers. For non-fossil fuel electricity generation, theoretical losses are shown based on plant

efficiencies of approximately 33% for nuclear and solar thermal; 10% for geothermal; and 100% for

hydro, wind and solar photovoltaic.

10. Toe per thousand US dollars at 2010 prices and exchange rates.

11. “CO

emissions from fuel combustion” have been estimated using the Intergovernmental Panel on

Climate Change (IPCC) Tier I Sectoral Approach methodology from the 2006 IPCC Guidelines.

Emissions from international marine and aviation bunkers are not included in national totals.

ANNEXES

210

ANNEX C: International Energy Agency’s “Shared Goals”

The member countries* of the International Energy Agency (IEA) seek to create conditions in which the

energy sectors of their economies can make the fullest possible contribution to sustainable economic

development and to the well-being of their people and of the environment. In formulating energy policies,

the establishment of free and open markets is a fundamental point of departure, though energy security

and environmental protection need to be given particular emphasis by governments. IEA countries

recognise the significance of increasing global interdependence in energy. They therefore seek to

promote the effective operation of international energy markets and encourage dialogue with all

participants. In order to secure their objectives, member countries therefore aim to create a policy

framework consistent with the following goals:

1. Diversity, efficiency and flexibility within the energy sector are basic conditions for longer term

energy security: the fuels used within and across sectors and the sources of those fuels should be as

diverse as practicable. Non-fossil fuels, particularly nuclear and hydro power, make a substantial

contribution to the energy supply diversity of IEA countries as a group.

2. Energy systems should have the ability to respond promptly and flexibly to energy emergencies.

In some cases, this requires collective mechanisms and action: IEA countries co-operate through the

Agency in responding jointly to oil supply emergencies.

3. The environmentally sustainable provision and use of energy are central to the achievement of

these shared goals. Decision makers should seek to minimise the adverse environmental impacts of energy

activities, just as environmental decisions should take account of the energy consequences. Government

interventions should respect the polluter-pays principle where practicable.

4. More environmentally acceptable energy sources need to be encouraged and developed. Clean

and efficient use of fossil fuels is essential. The development of economic non-fossil sources is also a

priority. A number of IEA member countries wish to retain and improve the nuclear option for the future,

at the highest available safety standards, because nuclear energy does not emit carbon dioxide.

Renewable sources will also have an increasingly important contribution to make.

5. Improved energy efficiency can promote both environmental protection and energy security in a

cost-effective manner. There are significant opportunities for greater energy efficiency at all stages of the

energy cycle from production to consumption. Strong efforts by governments and all energy users are

needed to realise these opportunities.

6. Continued research, development and market deployment of new and improved energy

technologies make a critical contribution to achieving the objectives outlined above. Energy technology

policies should complement broader energy policies. International co-operation in the development and

dissemination of energy technologies, including industry participation and co-operation with non-member

countries, should be encouraged.

ANNEXES

211

ANNEXES

7. Undistorted energy prices enable markets to work efficiently. Energy prices should not be held

artificially below the costs of supply to promote social or industrial goals. To the extent necessary and

practicable, the environmental costs of energy production and use should be reflected in prices.

8. Free and open trade and a secure framework for investment contribute to efficient energy markets

and energy security. Distortions to energy trade and investment should be avoided.

9. Co-operation among all energy market participants helps to improve information and

understanding, and encourages the development of efficient, environmentally acceptable and flexible

energy systems and markets worldwide. These are needed to help promote the investment, trade and

confidence necessary to achieve global energy security and environmental objectives.

(The Shared Goals were adopted by IEA Ministers at the meeting of 4 June 1993 in Paris, France.)

* Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece,

Hungary, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, New Zealand, Norway, Poland, Portugal, the

Slovak Republic, Spain, Sweden, Switzerland, the Netherlands ,Turkey, the United Kingdom and the United States.

ANNEXES

212

ANNEX D: Glossary and list of abbreviations

In this report, abbreviations and acronyms are substituted for a number of terms used within the

International Energy Agency. While these terms generally have been written out on first mention, this

glossary provides a quick and central reference for the abbreviations used.

Acronyms and abbreviations

AC alternating current

AI artifical intelligence

ALINNE Alliance for Energy Research and Innovation

BST thermal social bond

BWR boiling water reactor

CDTI Centre for Industrial Technological Development

CEIDEN Nuclear Fission Energy Technology Platform

CIEMAT Centre for Energy, Environment and Technology Research

CNMC Commission of Markets and Competition

carbon dioxide

CORES Corporation of Strategic Reserves of Oil Products

CSF centralised storage facility

CSN Nuclear Safety Council

DC direct current

DGR deep geological repository

DSO district system operator

E&P exploration and production

EPB Energy Performance of Buildings (Directive)

ERDF European Regional Development Fund

ESD Effort Sharing Decision

ESR Effort Sharing Regulation

ETS Emissions Trading System

EU European Union

EV electric vehicle

FNEE National Energy Efficiency Fund

GDP gross domestic product

GDP PPP gross domestic product with purchasing power parity

GHG greenhouse gas

GRWP General Radioactive Waste Plan

HLW high-level waste

IDEA Institute for Diversification and Energy

IDR in-depth review

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ANNEXES

IEA International Energy Agency

IGCC Integrated gasification combined cycle

IPCC Intergovernmental Panel on Climate Change

LILW low- and intermediate-level waste

LNG liquefied natural gas

LPG liquefied petroleum gas

LTS Long-Term Strategy

LULUCF land use, land-use change, and forestry

MIBEL Iberian power market (Mercado Ibérico de Electricidad)

MITERD Ministry for the Ecological Transition and the Demographic Challenge

NECP National Energy and Climate Plan

NPP nuclear power plant

OMI Iberian Market Operator (Operador del Mercado Ibérico)

PAREER Energy Rehabilitation of Existing Buildings Programme

PPA power purchase agreement

PPP purchasing power parity

PV photovoltaics

PVPC voluntary price for the small consumer

PWR pressurised water reactor

R&D research and development

RD&D research, development and deployment [or demonstration]

REMIT Regulation on Wholesale Energy Market Integrity and Transparency

SME small and medium-sized enterprise

SNF spent nuclear fuel

SW special waste

TES total energy supply

TFC total final consumption

TFeC total final energy consumption

TPES total primary energy supply

TSO transmission system operator

USD United States dollar

VLLW very low-level waste

Units of measure

bcm billion cubic metres

-eq carbon dioxide equivalent

GW gigawatt

GWh gigawatt hour

kb/d thousand barrels per day

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214

km kilometre

square kilometre

kote kilotonne of oil equivalent

kW kilowatt

kWh kilowatt hour

m metre

cubic metre

mb million barrels

mcm million cubic metres

Mt CO

million tonnes of carbon dioxide

Mt CO

-eq million tonnes of carbon dioxide equivalent

Mtoe million tonnes of oil equivalent

MW megawatt

megawatt electrical

MWh megawatt hour

t CO

tonne of carbon dioxide

toe tonne of oil equivalent

Twh terawatt hour

241

This publication reflects the views of the IEA Secretariat but does not necessarily reflect those of

individual IEA member countries. The IEA makes no representation or warranty, express or implied, in

respect of the publication’s contents (including its completeness or accuracy) and shall not be

responsible for any use of, or reliance on, the publication.

Unless otherwise indicated, all material presented in figures and tables is derived from IEA data and

analysis.

This publication and any map included herein are without prejudice to the status of or sovereignty

over any territory, to the delimitation of international frontiers and boundaries and to the name of any

territory, city or area.

IEA Publications

International Energy Agency

Website: www.iea.org

Contact information: www.iea.org/about/contact

Typeset in France by IEA - May 2021

Cover design: IEA

Spain 2021

Energy Policy Review

The International Energy Agency (IEA) regularly conducts in-depth peer reviews of the energy

policies of its member countries. This process supports energy policy development and

encourages the exchange of international best practices and experiences.

Since the last IEA review in 2015, Spain has solved a long-standing issue of tari deicits in its

electricity and gas sectors and closed all of its coal mines, which has allowed it to place the

energy transition at the forefront of its energy and climate change policies.

The current Spanish framework for energy and climate is based on the 2050 objectives of

national climate neutrality, 100% renewable energy in the electricity mix, and 97% renewable

energy in the total energy mix. As such, it is centred on the massive development of renewable

energy, energy eiciency, electriication and renewable hydrogen.

Notwithstanding its considerable progress to date on decarbonising and increasing the share of

renewables in the electricity sector, Spain’s total energy mix is still heavily dominated by fossil

fuels. Notably, the transport, industry and buildings sectors all have considerable work ahead of

them to meet the country’s targets for decarbonisation and higher shares of renewables.

When all of Spain’s plans and strategies are implemented, a completely dierent energy sector

will emerge in which fossil fuels are no longer dominant and end-user sectors are mostly

electriied. Such a transformed energy landscape will come with new challenges and will provide

new opportunities.

In this report, the IEA provides energy policy recommendations to help Spain eectively manage

this transformation of its energy sector.