“In The International Arbitrations, The Spanish Regulator Agreed With The Electricity Oligopoly’s Arguments”

Grenergy appointed Rocío Hortigüela independent member of the its Board of Directors in November 2019

Mari Pinardo | Rocío Hortigüela, member of Grenergy’s Board of Directors, explains that a “healthy struggle” between the regulator and the regulated is natural. “But when the number of those regulated is small, and a few of them have a big influence on the market and the economy, the forces can be unbalanced in certain situations of crisis or misgovernment. And this should not happen. So at such times we need to rely on a truly independent and agile judicial system to put things back in order,” she adds. “Unfortunately, in Spain’s case, when these imbalances have occurred in recent history, the judicial system has proved to be neither agile nor independent,” says.

Q: In Spain we have an installed capacity of 100,000 Mgw, twice the capacity we need. How do you manage this when Europe does not seem to be in a hurry to increase the connections that would allow us to export it?

A: It is precisely because Europe does not appear to be in a hurry and, even less so, our northern neighbour, to promote interconnection that the Spanish electricity system is managed almost like an island. That means with sufficient backup power from a varied mix of technologies to overcome any incidents, and a large network manager to supply loads in real time. On the other hand, of the little more than 100 GW installed, there is an important part that will stop operating in the next few years – the coal or nuclear power plants. This gap will be filled by renewable generation, hybridization of technologies and storage capacity. The transition will be very positive for the sector and for society in general. This is due to the reduction in the carbon footprint, the cut in production cost, the lower dependence on fossil fuel producing third countries, the equilibrium of balance of payments and the reduction of losses in distribution and transport…

Q: That is correct. But in view of the figures, the world is not replacing oil and fossil fuels or nuclear energy. Renewables are merely an addition to what already existed.

A: It’s true that renewables are adding to existing fossil fuel power instead of replacing it. The latter would be desirable because it would speed up the renewables’ implementation. That said, this trend is changing, although at a different pace depending on what area of the world we are talking about. The capacity for substitution depends largely on the political will to make it happen. On the one hand, leaving the market itself to act. And on the other eliminating barriers to implementation and subsidies for the use of fossil fuels. With the right regulatory signals, the process can be accelerated. We are confident that the new Climate Law will have this effect in Spain. And that we will be able to transform the renewable energy industry once again into one of the motors of economic recovery.

Q: Spain was once a leader in the installation of renewable energies, albeit at the cost of offering an almost unbeatable financial and fiscal return of 13%. We have invested billions, but today there is not one single manufacturer of photovoltaic panels left, and the person who will run Isofoton runs a bank; Gamesa is owned by Siemens … where have we gone wrong?

A: On the one hand, by not following the initial plan or the spirit of Royal Decree 436/04. This established a limit of 150 MW of solar power for the whole of Spain at the initial price – a figure that today looks ridiculous. Then later a revision of the fees was planned, in line with the rate of investment and the maturity of the technologies. As much as the regulator may regret having done so, it flagrantly neglected its duty. And it wanted to pass the buck of responsability for the effects on the system to private investors in renewable energies, by demonising them first and later damaging them.

Q: Private investors who came in by the thousands.

A: It should be remembered that these private investments enabled the development of Spain’s photovoltaic industry’s entire value chain:  from the smelting of silicon ingots to the construction of plants, their operation and maintenance and all the associated technologies. It was an almost unprecedented achievement for the Spanish industry, but the crisis came and with it the legal insecurity, the cuts in remuneration and the halt on new developments. Instead of dedicating resources to protect the sector, to protect its jobs and to promote R+D+i, the government preferred to attack it. It let it decline and dedicated the resources to pay the unemployment benefits related to the over sixty thousand direct jobs that were lost.  The companies with capacity to do so relocated their investments and with them their know-how. Meanwhile, in others, as you mention, the control was transferred to foreign multinationals. It is not pleasant remembering this, but it should help us learn from our mistakes.

Q: Is the introduction of a charge to discourage the installation of renewable energy plants the result of pressure from the so-called electricity oligopoly?

A: In the same way as Mexico is now trying to “protect its industry” by preventing the development of renewable energy projects, arguing that oil is Mexican, as if the sun and the wind were not. At that time in Spain, the intention was to “protect the electricity system with its underlying structural problems” by implementing restrictions. In addition, amongst other things, delaying as much as possible the development of self-consumption practices as if that were the system’s greatest threat. Everyone knows that with the fall in demand when the crisis arrived, those most affected by these structural problems were the companies of the electricity oligopoly, but also the end consumer. Of course, it was not the end consumer who was protected by not allowing them to lower their electricity costs through self-consumption…

Q: There is a whole theory about how oligopolies ‘capture the regulator’, so that in the end this regulator favours or protects those who should regulate. Can this problem occur within the electricity sector?

A: A “healthy struggle” between the regulator and the regulated is natural. But when the number of those regulated is small, and a few of them have a big influence on the market and the economy, the forces can be unbalanced in certain situations of crisis or misgovernment. And this should not happen. So at such times we need to rely on a truly independent and agile judicial system to put things back in order. Unfortunately, in Spain’s case, when these imbalances have occurred in recent history, the judicial system has proved to be neither agile nor independent. This is shown, for example, by the fact that under the protection of international arbitration courts – which are available to them because they are foreign – independent international promoters are being proved right against the regulator who, curiously enough, agreed with arguments of the electricity oligopoly.