Kate Mackenzie Spain wants it both ways on energy – like everyone else

El Marquesado 2 wind farm, Granada, Spain

El Marquesado 2 wind farm, Granada, Spain

Spain wants to double its subsidies for domestic coal-fired power; and it’s having a bit of trouble doing so, thanks to European Union competition rules.

That’s right, Spain — the country that is the world’s biggest per-capita producer of wind energy, home to the world’s biggest wind power operator, not to mention being a rather significant player in the world solar market, too. From the FT:

The Spanish plan centres on giving preferential access to the wholesale electricity market for power plants that run on domestic coal, and was announced by the government in February, after months of behind-the-scenes tussling with Brussels.

At the same time, the Spanish government wants to retroactively cut previously agreed tariffs for its €20bn photovoltaic solar energy sector by 30 per cent. As FTfm reports, such a move could be devastating for investors in highly-leveraged solar photovoltaic projects.

The electricity sector isn’t thrilled about the coal move, which could force them to switch from cheaper imported coal to more expensive domestic supplies. A related government move to freeze electricity tariffs led rating agency Moody’s to yesterday put Iberdrola and its subsidiaries on a negative outlook.

But two things are worth noting:

Firstly, Spain’s economy is in a fairly awful condition. Along with some of its eurozone peers, its banking sector has been wobbly and it went several months this year with the market shunning its bonds. Unemployment is 20 per cent; and austerity measures including a cut in public sector wages and a sales tax hike are bound to be unpopular. So it’s perhaps unsurprising the government wants to stop electricity bills rising, and create a few domestic coal jobs to boot. As the FT writes of the measures:

It has enjoyed strong political backing from Spain’s prime minister, José Luis Rodríguez Zapatero, who hails from Spain’s coal-mining region of León, and is expected to involve about €2bn-worth of government aid over a four-year period. Total government production aid for the coal sector in Spain was €434m in 2008, out of an EU-wide total of around €2.9bn.

Second, Spain is hardly alone in wanting it both ways.

In May, ‘furious lobbying’ by the UK coal power industry won a four-year reprieve for its old coal-fired plants, which were due to close in 2014 under an EU directive. This is despite the country having committed (at least, under the then-government) to an EU target of 15 per cent renewable power by 2020, and its own carbon budget of reducing carbon emissions by 34 per cent in the same timeframe. Targets which, incidentally, it looks like missing.

And then there’s China, which is furiously building out its renewables capacity. Also increasing furiously are its coal burning, buying up of fossil fuel assets, and overall energy consumption.

Not to mention the US, where the desire to win the ‘clean tech race’ apparently won’t hamper the growing consumption of highly polluting unconventional oils. It also looks unlikely to introduce binding carbon emissions targets for years now – along with Australia, which doesn’t even have the excuse of having suffered a recession.

Governments everywhere, it seems, will go to great lengths to ignore long-term emissions growth and supply problems, as long as it means not upsetting their constituencies in the short-term.

Related links:

China and India, the CO2 culprits of 2009 - FT Energy Source