Can Spain become a European energy power? | Business | Economic and financial news from a German perspective | DW

Although Morocco and Spain are not exactly friends, they are economically dependent on each other. Algeria isn’t exactly a trusted partner close to Spain either, but that hasn’t stopped Spanish Prime Minister Pedro Sanchez from visiting it recently. With Vladimir Putin’s attack on Ukraine and Nord Stream 2 on ice for now, everything suddenly looks different.

Although far from fighting, the new political situation changes things for Spain in many ways. Its long-standing economic ties with the Middle East and North Africa, and its many solar and wind farms are suddenly attracting attention. The country also has six coveted liquefied natural gas (LNG) terminals; a seventh is under construction. At the same time, it seeks to strengthen its links with Nigeria and other suppliers of raw materials.

The Iberian country already generates more than 21% of its gross energy consumption from renewable sources and therefore does not currently have any supply problems. Overall, many see it as a huge opportunity for the country to become a future European energy superpower.

Spanish Prime Minister Pedro Sanchez bets on renewable energies

Bringing MidCat back to life?

Spain’s over-reliance on tourism has been highlighted during the pandemic lockdowns and travel restrictions. Now the country wants to use the 140 billion euros ($154 billion) from the European Union‘s Next Generation Fund for greening its economy. This involves the production of green hydrogen.

Ursula von der Leyen, the president of the European Commission, has been to Madrid several times and agrees. It is also interested in the relaunch of the MidCat Pipeline project (Midi Catalonia), a gas link between Spain and France. After building 80 kilometers (49.7 miles) of gas pipeline in Spanish territory, construction work was halted in 2019. If completed, the pipeline would have a capacity of 7.5 billion cubic meters of gas and could be the start of something bigger. By comparison, Nord Stream 1 can process 55 billion cubic meters of gas per year.

MidCat Pipeline protesters in Barcelona in December 2017

Construction of the MidCat pipeline was stopped years ago – it may well be restarted

There are currently only two relatively small gas pipelines transporting gas from Navarre and the Basque Country to France. The Spanish Minister for the Environment, Teresa Ribera, recently criticized France for not wanting to participate in the revival of the MidCat project.

“It’s mainly about funding. However, the failure of Nord Stream 2 has made the subject topical again,” said Ignacio Cembrero, a North Africa expert.

Lower energy prices at home first

However, the Spanish Prime Minister must first bring down energy prices in his own country in the short term. The country has been plagued by the COVID-19 pandemic, snow disasters, inflation and now extreme drought. Many homes are suffering.

The value added tax has already been reduced on electricity, but this is not enough for the opposition to the government. Faced with soaring gas prices, Sanchez wants to ensure that green sources such as hydroelectricity, sun and wind become more attractive again. Sanchez has now embarked on a European goodwill tour to promote his plan.

A solar energy research facility in Almeria, Spain

Spain will have to invest in many new technologies to exploit its full energy potential

He wants a consensus within the EU. Some market watchers see a window of opportunity – economic and political – for Spain. Others consider its goal of becoming an energy provider illusory.

“It is clear that by 2025, thanks to our many wind and solar parks, we will be able to reach a price per megawatt of €50 for electricity, while Germany and France will pay between €60 and €70” , predicts Luis Merino. , editor-in-chief of Renewable Energies magazine, based on data from Spanish electricity market operator Omel. This would indeed make the country more interesting as an energy exporter.

Changing strategy takes time

Spain already has some experience in energy transport. In January 2022, the country exported more electricity to France than it imported.

“Due to our low population density, we also have the opportunity to build more hydraulic systems and invest in sources such as geothermal energy,” said Roberto Gomez-Calvet, an energy expert at the University. Valencian European. “But the current government’s strategy, which is basically right, will take years.”

Asco Nuclear Power Plant, in Asco, Tarragona in northeastern Spain

Spain has five nuclear power plants still online, but they are all ready to be decommissioned

He thinks leaving coal behind a few years ago was a mistake given the current situation. Spain has only five operating nuclear power plants, and these are expected to be disconnected from the grid in the coming years: “That’s out of the question at the moment,” Gomez-Calvet said. This is especially true if Spain wants to be a real energy exporter.

Green Hydrogen Plant Experience in Mallorca

The energy expert thinks the production of green hydrogen is too expensive and not efficient enough. “But there doesn’t seem to be any other option on the table right now to replace the missing oil and gas,” Gomez-Calvet said. This is why the first green hydrogen plant has just been put online in Mallorca. It will be a kind of guinea pig for the industry: “For the moment, it’s still a kind of laboratory”, concludes Gomez-Calvet.

For Sanchez’s dream of making Spain a major energy producer to come true, gas would have to be imported massively from the United States, thinks Roberto Centeno, a former director of the Spanish gas company Enagas. “Previously we wanted to connect to France, but bring Russian gas to Spain, not the other way around,” he said. Moreover, Algeria could never replace Russia as a supplier to Europe.

Spain currently has 35% of the EU’s liquid gas reserves. Portugal, which also has a liquid natural gas terminal, supports Sanchez’s dream and sees an opportunity for its own country to invest even more in alternative energy.

Cembrero not only sees advantages in the current geopolitical situation, in fact problems are just around the corner. “Algeria’s gas connection to Morocco, which Spain used to cover part of its gas needs, was blocked due to political disputes. By resuming energy relations with Algeria, Morocco and Spain is opening a Pandora’s box as possibly supporting terrorists Africa and the status of Western Sahara,” the North Africa expert said.

Right now, however, no one can seem to avoid making rotten compromises on energy policy in Europe, because beggars can’t choose.

This article was originally published in German.

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