Spain told to stop subsidising coal

SPAIN: The European Court of Justice has clamped a temporary injunction on a Spanish government decree that subsidises and prioritises power produced from national coal.

This follows opposition to the decree by the Spanish wind lobby, which argues that it would indirectly result in clean wind power being pushed offline to make room for dirty coal power.

The government had planned to implement the decree in November. The injunction could be lifted after the court hears the case in the next two or three months. Accordingly, the wind lobby is keeping its guard up.

Spain's wind association, Asociacion Empresarial Eolica (AEE), is joined by various environmental groups - including Greenpeace and WWF - in protest against pumping scarce money into "a dirty, dying and unwanted breed", in the words of one AEE member. The utilities association is also complaining, as power stations using Spanish coal will push offline larger plants using more efficient imported coal. Gas, which is cleaner than coal and a lot more useful for regulating the system against both demand variations and renewables output variations, is also threatened.

The government justifies the decree by arguing that it guarantees power supply with indigenous sources. It also aims to soften the blow to Spain's mining communities as demand for more expensive and less efficient national coal declines.

The decree requires operating power stations capable of burning national coal - around 4.2GW of capacity in all - to buy a combined 10.1 million tonnes annually to 2014, when the support ends.

In return, producers are guaranteed a subsidised price, varying from plant to plant but averaging at EUR60.26/MWh in 2010 and EUR66.62/MWh for 2011, with reviews for the following three years. Spain's electricity regulator estimates this constitutes an extra cost of at least EUR503 million a year to an electricity system that already has a EUR20 billion cumulative deficit.

The wind lobby points out that government attempts to reduce that deficit led to wind power capacity being capped at 6.4GW between 2009 and 2012 - around 1GW below capacity.

Coal will not push wind directly off the system, even if the injunction against the decree is lifted. Maria Luisa Llorens, head of market operations at system operator Red Electrica de Espana, says the order of merit for grid access is clear-cut. Top priority goes to "non-manageable" renewable technologies, defined as generators varying at a par with non-controllable elements such as wind, sunshine or water flow.

But this knowledge only partially allays wind sector fears. AEE's technical director, Alberto Cena, points out combined-cycle gas power is the most flexible of all the conventional fossil-fuel technologies. Large amounts of Spain's 18GW gas power capacity can smoothly cushion the ups and downs in wind generation, he says. If coal pushes gas off the system, there is less elasticity, which threatens wind.

Indeed, wind power's access to the grid is prioritised only when national electricity supply guarantees are not at risk. Wind power is curtailed in Spain when increased wind production would otherwise push conventional reserve capacity offline. That reserve is needed to guarantee demand can still be met if a sizeable drop in wind coincides with an estimated big increase in load. For example, winds can drop in the early morning, whereas increased demand when people wake up is assured.

By pushing cleaner gas off the system, the decree also flies in the face of the European energy directive to prioritise cleaner power sources, not just renewables, wherever possible. Spain's energy regulator, Comision Nacional de Energia, estimates annual CO2 emissions could rise by 20% next year simply by coal pushing gas off the system.

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