Spain 129
industry, with the lack of incentives to finance the promotion of renewables,
leading to competitiveness losses.
Along similar lines, the increase of the price of electricity to end users has
especially been affecting the more vulnerable households and industries. RES
support is currently an important component of the regulated cost of electricity.
Thus, due to the need to finance relevant RES subsidies by means of an electricity price surcharge and the lack of competitiveness in the electricity sector,
electricity prices in Spain have increased significantly. Despite being connected
to mainland Europe, interconnection is limited. In fact, Spain is commonly
known as an ‘energy island’ and therefore one of the European plans for the
2030 roadmap is to increase interconnections in this sense. Spaniards currently
pay the third- highest electricity tariffs in Europe, after Cyprus and Malta –
island countries highly dependent on imported oil products for electricity generation. As such, regressive effects of regulations are most often impacting those
who are least able to afford it, who are forced to bear the costs while benefiting
from relatively few advantages. The poorest households are even more affected
by higher electricity prices since they expend a greater proportion of their
income on electricity. Spending on electricity as a proportion of disposable
income in the poorest households is around 5%, whereas in the richest households it is around 1% (Garcia- Muros, Böhringer, and Gonzalez- Eguino, 2017).
These regressive impacts can reduce the political feasibility of new measures to
promote renewable energy sources. Public acceptability is essential for effective
mitigation policies to be adopted, and equity and fairness play an important role
in how such measures are regarded by public opinion (Bristow et al., 2010).
Despite the social bonus mechanism (BOE, 2009) – presenting a 25% discount on the total electricity bill for eligible households – for protecting vulnerable consumers with low incomes, it has been observed that energy poverty in
Spain increased from 3.6% before the economic crisis in 2007 to 9.88% in 2013
(nominal values) after the average electricity bill grew by 76% and natural gas
bills by 35% (Economics for Energy, 2015).
Implementation risks and the roll out of renewables
Stakeholders have portrayed an evident level of pessimism due to cutbacks in
the renewables roll out due to regulatory changes, especially from 2013 onwards.
Uncertainty lingers along with the highly volatile agenda of political parties,
oftentimes changing based on election cycles. Moreover, additional compensation adjustment mechanisms along the timeline add overall uncertainty and
instability to investments in the system, potentially aggravating additional risk
factors in the future.
One of the biggest and foremost characteristics within the Spanish electricity
sector is that over 75% of electricity generation and over 85% of sales (Unesa,
2013) are controlled by five major companies (Iberdrola, Gas Natural Fenosa,
Endesa, Viesgo, and EDP), meaning that the electricity market presents a
typical structure of an oligopoly. In this type of market structure the risk of lack
industry, with the lack of incentives to finance the promotion of renewables,
leading to competitiveness losses.
Along similar lines, the increase of the price of electricity to end users has
especially been affecting the more vulnerable households and industries. RES
support is currently an important component of the regulated cost of electricity.
Thus, due to the need to finance relevant RES subsidies by means of an electricity price surcharge and the lack of competitiveness in the electricity sector,
electricity prices in Spain have increased significantly. Despite being connected
to mainland Europe, interconnection is limited. In fact, Spain is commonly
known as an ‘energy island’ and therefore one of the European plans for the
2030 roadmap is to increase interconnections in this sense. Spaniards currently
pay the third- highest electricity tariffs in Europe, after Cyprus and Malta –
island countries highly dependent on imported oil products for electricity generation. As such, regressive effects of regulations are most often impacting those
who are least able to afford it, who are forced to bear the costs while benefiting
from relatively few advantages. The poorest households are even more affected
by higher electricity prices since they expend a greater proportion of their
income on electricity. Spending on electricity as a proportion of disposable
income in the poorest households is around 5%, whereas in the richest households it is around 1% (Garcia- Muros, Böhringer, and Gonzalez- Eguino, 2017).
These regressive impacts can reduce the political feasibility of new measures to
promote renewable energy sources. Public acceptability is essential for effective
mitigation policies to be adopted, and equity and fairness play an important role
in how such measures are regarded by public opinion (Bristow et al., 2010).
Despite the social bonus mechanism (BOE, 2009) – presenting a 25% discount on the total electricity bill for eligible households – for protecting vulnerable consumers with low incomes, it has been observed that energy poverty in
Spain increased from 3.6% before the economic crisis in 2007 to 9.88% in 2013
(nominal values) after the average electricity bill grew by 76% and natural gas
bills by 35% (Economics for Energy, 2015).
Implementation risks and the roll out of renewables
Stakeholders have portrayed an evident level of pessimism due to cutbacks in
the renewables roll out due to regulatory changes, especially from 2013 onwards.
Uncertainty lingers along with the highly volatile agenda of political parties,
oftentimes changing based on election cycles. Moreover, additional compensation adjustment mechanisms along the timeline add overall uncertainty and
instability to investments in the system, potentially aggravating additional risk
factors in the future.
One of the biggest and foremost characteristics within the Spanish electricity
sector is that over 75% of electricity generation and over 85% of sales (Unesa,
2013) are controlled by five major companies (Iberdrola, Gas Natural Fenosa,
Endesa, Viesgo, and EDP), meaning that the electricity market presents a
typical structure of an oligopoly. In this type of market structure the risk of lack