Increases in the Cost of Electricity Are Causing Spain to Slow Down Its Transition to Renewable Energy

Increases in the Cost of Electricity Are Causing Spain to Slow Down Its Transition to Renewable Energy

It is well known that any war has a great impact on the environment and on the economy. But, how is it related to climate change policies?

First, let’s remember that market instabilities always lead to a strong increase in energy supplies. With the invasion of Ukraine by Russia, the price of electricity has reached a new record in Spain. The country is facing the largest year-on-year increase in the price of electricity in recent history.

In Spain, electricity prices are set by the price of gas, from which more than 25% of electricity is produced. The supply of gas has been greatly affected by the Ukraine crisis, both because of its direct relationship with the price of oil, as both of these fossil fuels are competitive substitutes primarily in the electric generation and industrial sectors of the economy, and the fact that a large part of the world’s gas supply comes from Russia, which threatens the arrival of supplies, generating market speculation and rising prices in all of Europe.

In the case of Spain, according to the Strategic Reserves of Petroleum Products Corporation (Cores), in 2021 only 10.7% of gas imports came from Russia, while 35% came from Algeria, Spain’s main natural gas supplier.

Bye-bye decarbonization? 

Ukraine’s invasion is likely to roll back environmental gains in all of Europe. In Spain, the increase in the price of electricity threatens the country’s decarbonization effort.

Now that energy transition goals are directly colliding with those of energy security, there is a real risk that the need to face the energy crisis with immediate measures will be done at the expense of the decarbonization objectives, endangering the climate agenda.

The energy crisis caused by the dependence on Russian gas has reopened debates around a return to the consumption of fossil fuels, which contradicts efforts against warming.

Spain is close to closing all of its coal plants. But with the electricity market setting historical maximum prices for months, these almost closed and out of operation coal plants are now reactivating and boosting their production.

Until August 2021, coal’s share of Spanish electricity generation had fallen to 1.6%, but since then production the percentage share has grown unexpectedly to around 3%. The exorbitant rise in electricity prices has made burning coal to produce electricity acceptable and, of course, profitable again.

What can Spain learn from the war?

The greatest lesson any country should learn from this crisis is that the best way to guarantee energy sovereignty and security is to end fossil fuels dependence. The only possible answer to the energy crisis is to speed up the energy transition. Instead of reopening old debates, Spain should double their efforts to promote energy autonomy by speeding up the deployment of electrical and thermal renewables.

This Post was submitted by Climate Scorecard Spain Country Manager Ariela Schnitman


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