Spain’s carbon era expected to come to an end as Covid-19 drives gas generation and renewables expansion

GlobalData Energy 3 September 2020 (Last Updated September 3rd, 2020 09:51)
Spain’s carbon era expected to come to an end as Covid-19 drives gas generation and renewables expansion

Spain has implemented strict steps during the Covid-19 pandemic, the most notable being the country shutting down eight of its coal-based generation units, as well as its decision to phase out coal-based generation by 2025. The low cost of gas is acting as a likely trigger for the country to extend gas-based electricity generation, moving away from the unviable coal-based power plants.

Spain’s electricity demand was down by 8.5% in June compared to the same month last year. By the end of the month, the share of renewables and gas accounted for almost 74% of the generation in Spain. Out of the 74%, renewables represented 43.9% and gas made up approximately 32%, according to Red Electrica de Espana (REE).

The nation considers gas-based generation to be the next best alternative to coal-based. Generation from combined-cycle plants expanded by 5.5% in June compared to the pre-lockdown month of January as gas prices plummeted to new lows, according to REE. Looking ahead, overall gas-based generation is estimated to account for 20%-25% of the total generation.

H1 2020 saw 21.4% of the generation come from wind. For its portion, solar PV enrolled a new monthly generation maximum in June by producing 1,792 GWh, representing 6.1% in the generation mix in H1 2020, according to REE. June witnessed a minor drop in the percentage of renewables, most likely due to the gas-fired combined-cycle generation expanding its percentage share within the electricity generation blend in Spain. Fuel switching from coal to gas is likely to be driven by flagging Spanish spot gas prices, which in June, averaged 41% underneath as compared to what it was a year ago.

Renewables are likely to remain the preferred source of new capacity addition as it is now cheaper to produce electricity from renewables than with coal. It is a progressive step taken by the Spanish electricity companies to project renewables as fuel for the future, strengthening the efforts to achieve the commitment of greener sustainable electricity infrastructure. The green commitment of the Spanish Government is also anticipated to rake in new investments in the sector given the profitability of renewables, enabling recovery post-Covid-19.