The government can’t make up its mind to support gas, solar, nuclear, or none of the above

uncertainty(NucNet contributed to this report.) Spain is an energy island in Europe with less than 2% of its power coming across the border from France. This fact makes energy policy a critical success factor in forging the economic future of the country where unemployment is running at record high levels and the government’s credit rating has tanked.

These facts of life haven’t prevented the current Spanish government from dithering itself into inaction over which way to invest, or not, in new electricity generation capacity.

Spain doesn’t have many energy options primarily because it is one of Europe’s financial basket cases along with Greece and Ireland. A recent financial study indicates the country will face a shortage of investment capital for new energy projects including new base load generation and improvements to the nation’s electrical grid.

The New York Times reported Sept 22 that a gap between the regulated rates paid for electricity in Spain and what it costs to generate it will reach $27 billion by the end of the year. According to Gonzalo Diaz-Rato, a partner at Gala Fund Management, “the Spanish government’s energy strategy has been erratic and incoherent.”

“The government wants to increase its green credentials by paying unsustainable subsidies to renewable producers and talking tough to the nuclear lobby, be price-friendly to end customers who are also the voters, while also supporting coal producers, even if that is economically unfeasible and not environmentally friendly.”

At one time Spain was the darling of Europe when it came to solar energy. With abundant sunshine, and massive subsidies, the grow of solar energy surpassed expectations (50,000 installations; a $16 billion market) until the government realized it could no longer afford massive subsidies to the industry. It slammed on the brakes and spooked investors into taking their money overseas.

solar-energySpain’s about face with termination of massive subsidies for solar projects has “sent a shiver through investors” according to a Citigroup report. The analysis says future uncertainty about the government’s staying power with energy policy will raise the cost of capital for all new projects.

The government’s inability to come to terms with energy reality has pushed investment resources for solar and nuclear projects overseas. At a time when it needs help at home, the government seems to be doing just about everything it can to send those resources away.

Nuclear policy shifts into reverse

In the nuclear arena, the government played politics with the relicensing of one of its reactors. the Garona plant, renewing the license for just four years despite a safety evaluation from the regulatory agency that approved it for ten.

According to a review of Spain’s nuclear industry by the World Nuclear Organization

"License renewal for the Santa Maria de Garona plant came up for review in 2009. In June 2010 the Nuclear Safety Council (CSN) recommended that a 10-year extension be granted, to 2019. The CSN said that plant owner and operator Nuclenor had implemented a comprehensive work program to keep the 40-year old reactor fully serviceable, having spent some EUR 155 million on it."

The Socialist government, with a policy of closing down Spanish nuclear plants as early as possible, granted only a four-year license extension, to 2013.

Spain had an enviable track record of effective management of its reactors with uprates in power that added 519 MW to its nine reactors. Whether another 300 MW in planned uprates takes place is up in the air.

Deer in the headlights

It’s not that the nation’s political leaders have failed to take notice. The problem appears to be an inability to move in any direction for a sustained period of time in order to make a difference. The development of energy proposals got new emphasis this week with a series of meeting in the lower house of parliament.

The meeting is the latest in a series of sessions that have taken place over the past year which considered more than 60 proposals. That number was reduced to 23 of which agreement has been reached on just 9 provisions of a new national energy policy.

punt The energy study group’s unfinished consensus document punted policy about nuclear reactors five years into the future. The reason is that none of the nation’s nine nuclear reactors (7.5 Gwe) will reach 40 years years of operation by then.

Current government policy calls for closure and decommissioning at that point. If the government wants new reactors, it must start planning for them now, and not when it is closing down the current fleet.

Nuclear energy supplies about 20% of the energy mix. Last May, Maria Teresa Dominguez of the Spanish nuclear industry group Foro Nuclear, told the parliamentary study group Spain needs between 2.6-3.0 Gwe of new nuclear generation capacity. It appears no one was listening.

Opportunities abound abroad

While the government has not taken any steps to address the issue and none of the Spanish utilities have shown any interest in building new domestic reactors. it hasn’t stopped them from going overseas to build new energy projects.

One of the largest, Iberdrola is partners with utilities in the U.K. as part of that nation’s new build and is seeking contracts with Jordan. It will invest $7.2 billion in energy projects on the U.S.,which is about the cost of a new reactor in Spain. The net effect of Spain’s dithering is to push investors and expertise to other countries to the detriment of its own energy security.

Despite an overtly hostile view of nuclear energy, the country cannot do without its nuclear reactors. This is a reality check on the populist urges of the current political leadership. However, neither party has any interest in building new reactors.