Professional Documents
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Presentation
Prologue
Conclusions and recommendations of the
energy document
PRESENTATION
The search for competitive and sustainable energy from guaranteed supplies is
doubtless a basic demand of any modern, competitive economy. The economic growth
of a country, the development of its companies and the wellbeing of its citizens are
intimately linked to the way this important matter is resolved.
Here at the Crculo de Empresarios whose proposals have always clearly
reflected a marked concern for the interests of society as a whole we have often
reflected on this subject, in both specific documents and others of a more general
nature. In our Barometer of the Crculos, we recently noted the need for a regulatory
framework for infrastructures that is transparent, predictable and stable so as to
create prices, especially for energy, that do not cause a competitive disadvantage in
the international setting.
There are many factors technological, geopolitical and environmental that
affect this highly complex subject. And there are many consequences, both positive
and negative, from the way it is approached. The future of energy is something that
must be dealt with in a combined, coordinated way and on a global scale. Regarding
Spain, for example, there is a clear need for not only its own energy policy but for a
European policy. This is one of those areas where private initiative must be perfectly
coordinated with what the public powers are doing, on both the national and
international levels.
In Spain, and at the Crculo de Empresarios, we have companies that are in the
international forefront. Thanks to this, a first-class team directed by Josu Jon Imaz
and including representatives of energy producers, distributors, important consumers
and consultancy firms has taken several months to produce a thoroughly
documented,
rigorous
study
that
contains
important
conclusions
and
recommendations. My thanks everyone for their dedication and effort. And, above all,
for what I consider most important: future guidance in a subject that is essential for
our economy and our society. All of us citizens, companies and public
administrations should take it very much into account.
Mnica de Oriol
President of the Crculo de Empresarios
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PROLOGUE
What would we do in a world without energy? Of course this is a rhetorical question,
but its one thats been with human beings forever. Every great step forward in the
world has been propelled by energy. Almost a million years ago Man harnessed fire
and realized that this magic gave him the independence to prosper. Energy is just
that: progress, evolution.
We are in a tremendously changing global context on all levels, and this too is
related to energy. Were seeing highly variable prices, and as emerging powers awaken
from their lethargy to pursue development and progress, they will concentrate on
consuming energy in the coming decades. There are geopolitical conflicts caused by
energy, or where energy is used as a bargaining chip; there is a disproportionate
distribution of energy that should make us react and think rapidly.
This is a challenging time when energy companies, working with political decision
makers, must rise to the occasion and give society what it demands of us. We should
provide the energy that the world needs and do so in the most sustainable manner.
In this new setting of increasing demand by countries outside the OECD countries
with very different patterns of growth all the different energy sources should be
present, making optimal contributions to the different sectors. To achieve a more
developed and balanced world, the answer is not just one source of energy. There is
no single correct answer, no silver bullet. The solution is to use all sources, with each
one fulfilling its potential wherever necessary.
For this reason, and because we share responsibility, this publication has enlisted
the help of energy supply firms from different fields, as well as companies that
consume energy. We share a vision of energy and its future, and together we have
reflected on those aims that energy policies should guarantee: a reliable supply,
competition in industry and society, and sustainability. I want to thank all the
companies for the responsible way in which they participated: from the point of view
of the general interest rather than for sectorial gain. This contribution is especially
relevant in the Spanish context, where economic recovery has begun and where
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INTRODUCTION
The most recent estimates by the International Energy Agency foresee an increase of
33% in world energy demand by the year 2035. During this increase, the center of
gravity will move toward the emerging economies, especially China, India, Southeast
Asia and the Middle East. In addition to this heightened demand there are two
determining factors. First, it will be more difficult to obtain traditional energy sources,
both because it is harder to access some of them (for example, there are more difficult
conditions for exploring and exploiting) and because of uncertainty (i.e., geopolitical
reasons). And second, increasing concern about whether the current global energy
model is environmentally sustainable. These factors have created an enormous
challenge to those organizations that are responsible for energy policy and supply
(governments, agencies, public and private companies) as they try to satisfy the
expected demand.
In this context, the Energy Committee of the Crculo de Empresarios has made
some proposals to meet the challenges to the Spanish and European energy systems.
The proposals seek to advance in a balanced and rational way in three areas: (i)
improving economic competitiveness; (ii) making the supply more reliable, and (iii)
increasing sustainability.
Competitiveness in the cost of energy is essential for developing any energy
policy because it directly impacts Spains GDP and trade balance. In Spain, the energyintensive industries (metallurgy, chemicals, paper) represent 2.3% of the total GDP.
This figure is low in comparison to other European countries (for example Germany,
with 3.8%, and The Netherlands, with 3.2%) and similar to that in other countries (the
United Kingdom and France). However, the impact on the Spanish economy is very
important, because the industrial sector has a significant knock-on and multiplying
effect on GDP due to the network of its suppliers, as well as an indirect effect through
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the greater income and socio-economic wellbeing that it brings. In addition, Spain will
have to reinforce its industrial sector so that the economy will grow and be more
diverse and stable in the middle and short term. In this sense, the energy sector and
big industry share important challenges in maintaining economic sustainability and
competitiveness. Both sectors are essential for economic development in Spain and
have complementary challenges. A competitive energy sector one that is
economically sustainable and adequately integrated with the domestic energy market
will be able to offer Spanish consumers competitive electricity and gas prices. This will
allow Spanish industry to reach the necessary levels of activity and consumption
without which the sustainability of the energy sector would be at risk.
Gas accounts for an important percentage of the production costs in industries
like ceramics, glass, steel and part of the chemical sector. The drop in the demand for
gas, and the inclusion of new exogenous costs, could mean a change in costs for the
eventual consumer. Thus Spain should develop the necessary means for favoring the
use of indigenous gas at competitive market prices.
Another significant part of energy costs is in electricity, one of the most
important factors when defining Spains competitiveness on a global level. In recent
years in Spain the price of electricity has increased because of factors not directly
related to its supply but to environmental, industrial or social policies or directly
because of higher taxes on electrical consumption or production. In spite of the fact
that the electricity wholesale market is fluid and its prices are competitive when
compared to those in the principal European markets and that the network costs are
much lower than whats common in Europe strong regulatory and fiscal pressures
increase the final price that the consumer must pay for electricity. Following successive
reformation in the sector, the regulated component of the prices of electricity has
been reduced (for example renewable sources, transport and distribution payments,
cogeneration, interruptibility). Nevertheless, in an effort to lower public deficits, taxes
on energy have risen sharply. This increasing fiscal pressure threatens the
competitiveness if industry and the energy sector.
Energy efficiency
Renewable energies
Natural gas
Traditional fuels
Non-conventional fossil fuels
Interconnections
renewable technologies that seem most promising but which are currently not
technically and economically feasible. And all this should be done within the
framework of R+D.
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the system (because the greatest cost was in the initial investment). For this reason,
Spain is considering following the examples of other countries, and extending the life
of these nuclear plants to the age of 60. Naturally, any such extensions are subject to
the approval and terms of the pertinent safety agencies.
and LNG, or Spains renewable sources) and impedes Spain from using more efficiently
that capacity.
In the case of electricity, the interconnection capacity (1.4%) has not increased
in the last 30 years although by 2015 the new interconnection with France should be
functioning and is far from achieving the targets recently set by the European Union
(i.e., 10% by 2020 and 15% by 2030). This situation increases costs and volatility in the
Spanish market because we are unable to access nuclear energy from France. At the
same time, it prevents us from exporting our surplus renewable energy at certain
times, which is economically inefficient for the European Union as a whole because
that energy has a marginal cost that is close to zero. In this sense it will be important to
again promote electrical interconnection projects with Europe and seek the protection
of the EU in overcoming opposition to their development.
In the gas sector, the situation seems to be more positive. There are effective
plans to increase the interconnection with France from the current 5.4 bcm to 7.1 bcm
in 2015 by means of the planned enlargement scheduled for Irn; and up to 14.3 bcm
if the Midcat project materializes. (The EU has included it as a Project of Common
Interest). This interconnection, along with development of the hub, could turn the
Iberian Peninsula into an important gateway for gas into Europe, and achieve a more
efficient, transparent and fluid gas market in southern Europe. The development of
these markets, along with more interconnections, would make supply more reliable. In
addition, market exchanges and integration would improve, thus achieving more
unified prices and finally developing an internal gas market that is efficient and
competitive.
the energy sector would benefit from stability in the legal and regulatory
framework, and from a transparent and predictable process for the future. It would
be possible to avoid the abrupt changes that upset the smooth flow of the market
and discourage investors. To achieve this stability, there should be a pact between
the political parties about energy policy and climate change. This would protect
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regard to energy costs, taxes and charges, and exemptions from their payment.)
This will be the best way to promote loyal competition, innovation and
competitiveness in global markets.
4. Lower taxes and regulatory burden for all consumers. To achieve this, it is
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