Spanish election preview: Dividing energy policy lines emerge as poll looms

Spain goes to the polls on 20 December to elect a government to follow the incumbent, the conservative People’s Party (PP).

The PP’s reforms to the renewable sector and tackling of the daunting tariff deficit have played a key role in Spanish politics for some time.

The three opposition parties – the left-wing PSOE and Podemos parties, and the progressive Ciudadanos party – have all rejected the government’s recent energy reforms, which the PP has credited for saving the energy supply system from collapse.

With battle lines drawn, this split elevates energy policy to play an important role in the looming election.

The opposition parties have all united in committing to repeal the PP’s so-called “sun tax”. The government passed legislation on 9 October that would mean consumers with 10kW–100kW of capacity would not be paid for feeding solar power back into the grid.

The Spanish Photovoltaic Union described the tax as a “brake” on the development of self-produced energy.

Possible outcomes

Polls suggest PP will lose its majority in the election. The “best combination” for the structure of the Spanish supply system, an analyst for an investment bank said on condition of anonymity, is also the most likely: PP and Ciudadanos.

However, the parties would need to negotiate a joint position on the divisive “sun tax” if they were to form a coalition.

Fernando Garcia, analyst for financial services provider MainFirst, said if PP is returned to power it would represent the most positive result for Spain’s utilities and the maintenance of the status quo.

By contrast, if PSOE and Podemos form a coalition, the first analyst said the result would be “chaos” for the Spanish power market, on grounds that Podemos, in particular, has committed to far-reaching, radical reforms.

Challenges

However, Garcia said the opposition parties would be more likely to foster competition and change.

The PP has defended its term in office during which it addressed the tariff deficit of more than €30bn that built up over 10 years during which the state heavily subsidised its renewable sector and had strict control over domestic tariffs.

They are worried that there would be a repeat of the tariff accumulating again if renewables are supported, said the analyst, but now that renewables are cheaper to install and more efficient, “the situation has changed”. jon.stibbs@icis.com

Major parties policy positions

PP (Partido Popular):

The current government has cast itself as a safe pair of hands.

Energy minister Jose Manuel Soria claimed in late-October that stability had been brought back to the power sector thanks to its electricity market reforms. And the power tariff deficit has indeed been reduced. However, PP’s programme has created friction.

The next government will inherit a series of legal cases in the Supreme Court and the World Bank’s arbitration court ICSID over the retroactive removal of renewable subsidies.

But there are signs that PP has warmed to the renewables sector again. Spain is to hold its first renewable capacity auction since 2012 on 26 November and a plan to “relaunch the wind industry” has been cautiously welcomed by Spain’s Wind Energy Association AEE.

PSOE (Partido Socialista Obrero Espanol):

PSOE economic advisor Jordi Sevilla has accused the government of being too close to the utilities.

A PSOE administration would ensure electricity market regulation was independent of the major producers.

The party has also said it will encourage more competition among suppliers, which would be a challenge to existing providers.

The socialist party has yet to detail its energy policies in a manifesto. However, it has stated goals of providing stable support for renewables and promoting new interconnectors.

Podemos (Translates as We Can):

Podemos has the most radical agenda, including closing Spain power stations by 2024. It has proposed to invest 1.5% of GDP for 20 years in the development of renewable energy and reduce dependence on imported oil.

A tax on fossil fuels has been suggested to fund the expenditure, following collaboration with US economist Robert Pollin. The Pollin plan, which is exclusive to Spain, includes the reduction of energy consumption by 30%.

Podemos said it wants to dramatically reduce carbon emissions and transform Spain’s energy model.

The party was part of an event held on Wednesday at the European Parliament to discuss the problems with the current system. Conclusions will be passed onto the European Commission.

Ciudadanos (Translates as Citizens):

The self-styled progressive party has not laid out its energy plans but its MEPs will be invited to sign the letter addressed to the European Commission resulting from the Podemos event. Podemos leadership has also called on Ciudadanos to support its policy of scrapping nuclear power.