Spain: IEA praises Spain for robust energy security, but sees need for further improvement in other areas

In a review of Spain’s energy policies launched today, the International Energy Agency praised the country for its success in enhancing the security of its energy supply and introducing financial stability to the country’s electricity and natural gas systems. However, the report also detailed areas where Spain can improve its energy portfolio, including pushing for more energy efficiency so as to decouple demand and greenhouse-gas emissions from economic growth.

The report, Energy Policies of IEA Countries: Spain – 2015 Review, notes that Spain’s dependence on energy imports has decreased markedly, thanks to a decline in imports and an increase in renewable energy supply. With oil stocks that are substantially higher than what is required by law and liquefied natural gas (LNG) capacity that is significant by international comparison, Spain enjoys robust energy security. Spain has also a large, well-diversified power generation fleet and a very reliable power system.

As she presented the report in Madrid, IEA Executive Director Maria van der Hoeven said she hoped there would be new momentum for establishing additional cross-border connections in electricity and gas between Spain and France. The first new interconnection with France in almost three decades was inaugurated in February 2015, and several more gigawatts of capacity linking Spain and France are being planned. “After so many years of limited results, it is encouraging to see these steps in the right direction – but let us be clear, they are first steps. Indeed we will need many times more interconnections for such efforts to truly show their worth,” she said.

After several years of efforts, the government has managed to solve the massive imbalance between the electricity system’s regulated costs and revenues. Key to this was broad and deep electricity market reform which, among other aspects, fundamentally changed the remuneration principles for renewable energy. “Spain must now maintain its strong and long-term commitment to a financially sustainable electricity system,” Ms. Van der Hoeven stressed. “To regain investor confidence, it should also closely follow the principles of transparency, predictability and certainty when revising policies and regulations.”

The report also stressed that although Spain’s greenhouse gas emissions from energy use have been declining, they need to be reduced further, and the transport sector offers prime opportunities for this. A critical question is how to encourage the transition to a low-carbon energy system. In the context of EU 2030 targets and international climate negotiations, Spain should develop an energy strategy that integrates security of supply, sustainability and internal market dimensions. In doing so, Spain should seize the opportunity to play a bigger role in the context of one single European energy market.

Among its key recommendations, the IEA report calls for:

• developing a long-term energy strategy covering all sectors in close consultation with all stakeholders.
• reforming energy taxation and introducing revenue-neutral fiscal incentives to encourage greenhouse gas reductions and energy efficiency improvements.
• maintaining a strong long-term commitment both to balancing the costs and revenues in the electricity and natural gas systems and to the principles of transparency, predictability, and certainty when suggesting changes to these systems.