Interview to Marina Serrano
“We think that electricity, the main energy vector of the decarbonisation, should not be penalised in the energy transition”
We continue with the 2020 editorial line: climate challenges. This month of August we are dealing with a social challenge: the comprehensive electrification of all energy consumption. We have interviewed Marina Serrano, president of the Spanish Electrical Energy Companies Association. She has answered our questions about this challenge.
The electrification of society is basic to achieve the decarbonisation, what improvements should be carried out in the Spanish electric grid?
The ambitious decarbonisation targets passed by the European Union will only be achieved through the electrification of the economy. The commitment of the electrical sector to become carbon neutral by 2050 is firm and it has reduced its emissions by 28.7% in comparison to 2018, according to the recently published 2019 report of GHG Emissions. The report shows a historic reduction of emissions from the electrical sector, that represent a 13.5% of the total emissions.
Electricity is the most decarbonised energy vector due to its capacity to integrate renewable energies. This vector also allows a real increase of energy efficiency compared to others.
Renewable energies do not emit CO2 nor other pollutants. They do not generate waste, and, from an economic point of view, they are more and more competitive. Our target is to generate 75% of the electricity from renewables by 2030 and achieve carbon neutrality by 2050.
In this scenario, electric grids can help in the energy transition: operators have the knowledge and the experience to undertake the necessary changes. Grids will be key elements to integrate renewables, to improve energy efficiency or to make the demand more flexible. Grids are also important so generators and consumers can participate in an optimal way in the transformation of the sector.
So, from the point of view of distribution grids, challenges are huge: digitalization, automation, planning, and improvement of the communication protocols. The necessary investment up to 2030 is increasing so suitable conditions must be fixed to attract capital. In order to do that, the annual investment limit in distribution grids was modified from 0.13% of the GDP to 0.14%. However, it could be not enough to meet the 2030 decarbonisation targets. An increase or a temporary elimination of this limit would not only contribute to meet these targets but also to the economic recovery after the pandemic.
How could the society be involved in electrification?
The electrification of Spain is very low, around 23%. To meet the 2050 carbon neutral goals, electricity in the energy consumption must triple.
Energy-intensive sectors such as industry, transportation and construction must be electrified to meet the energy transition decarbonisation targets.
Transportation represents a fourth of the greenhouse gas emissions according to the last 2019 report of GHG Emissions, emissions increased 0.6% in comparison to 2018. So, we must give a boost to electrical vehicles to make the sector more sustainable. Whereas the construction sector is making progress in the energy transition thanks to the implementation of technologies such as heat pumps that increase the energy efficiency and the use of renewable energies.
A competitive electrical energy price is a basic aspect to get citizens involved and to accelerate the deployment of electrification. Electricity must be competitive to face up other cheaper energy sources that do not contribute to the climate action. Its price should be equal to its cost and no taxes should be levied due to energy politics. Also, electricity should not be charged by a 21% VAT nor a 5% special tax.
Thus, one of the first actions that should be undertaken is to get rid of all the costs included in the price of electricity that are not related to the supply and to rationalize taxes. Our supply costs are competitive in comparison to other neighbouring countries and they are expected to improve thanks to the low cost of renewables. So, the progressive elimination of additional costs should favour electrification.
Of course, another relevant issue is to increase the citizens awareness. Everyone’s contribution is important and, once people is aware of the consequences and targets, they can take good consumption decision.
Will the cost of climate action be charged to electricity and users?
According to the PNIEC −Spanish Comprehensive Climate and Energy Plan 2021-2030− macroeconomic assessment, the planned actions would imply an increase of the GDP of around €16,500-25,700M a year −a 1.8% of the GDP by 2030−. It means climate action has a positive effect on the economy.
In relation to the actions that directly affect the electrical sector, we are mainly talking about investment in renewable energy, energy efficiency and electrical grids. These costs cannot have a negative impact on the electrification process and users. Mature renewable technologies are competitive, and energy efficiency measures reduce the user’s energy bill. Finally, the automation, modernisation, and digitalization of the electric grid save money in grid planning and management. It must also be considered that the progressive electrification of the economy will increase the demand, so, the unitary costs paid by users will be reduced.
However, as I said before, the elimination and reduction of taxes is a critical aspect to avoid the lack of price competitiveness paid by consumers for their electrical supply in comparison to other energy vectors.
We think that electricity, the main energy vector of the decarbonisation, should not be penalised in the energy transition as it would risk the decarbonisation targets by 2050.
Could the total electrification of the demand help the economy and competitiveness of our productive fabric?
The target to decarbonise the economy by 2050 does not imply a total electrification of the energy demand, even though the use of electricity must increase. As abovementioned, electricity consumption must triple. There are a lot of energy consumptions that will be exclusively electrical in a future, however, others, specially some high-temperature industrial processes, will not have the option.
Anyway, the benefits of electrification are already a reality in 2020, as the results of the PNIEC analysis endorsed. The report on the economic, labour, social and public health impact of the PNIEC 2021-2030 draft concludes that all sectors will increase their electrification by 2030 and that will imply important benefits.
In the conclusions, together with the increase of the GDP, it states that the PNIEC will unblock €241,000M of investment in Spain from 2021 and 2030, boosting the economy. On the other hand, the measures that will be taken will create 253,000-348,000 new jobs from 2021 to 2030, an increase of the 1.7% of the employment in comparison to the trend scenario. Just the investment in renewable energies will create 107,000-135,000 jobs in the decade. It will benefit the manufacturing industry, construction and services related to renewable energies.
It will also save €67,000M up to 2030 in comparison to the trend scenario, thanks to the reduction of fossil fuel importations, what will also improve our energy security as they will be substituted by local energy sources.
The PNIEC report also stresses that low-income homes and vulnerable collectives will be favoured as their income and consumption will be increased more than others in proportion. Also, we cannot forget that these measures will have a positive impact in the health of citizens.
From your point of view, is the Climate Change and Energy Transition projected law to achieve carbon neutrality by 2050 enough to get the electrification in Spain?
At aelēc, we believe that the future Law for Climate Change and Energy Transition must be the grounds for the energy policy for the next ten years. A project not only to transform the electric sector, but also the whole energy sector, and, of course, the consumers. It must be a framework to establish measures for the necessary changes that will lead to the electrification of the economy as an energy vector and to attract the necessary investments to develop a new productive model. The European Union is considering this kind of measures: more clean energy generation and progressive limitation of fossil fuels. Also, there are new possibilities for consumers with the creation of new agents and the development of new technologies that will accelerate the change. That is the reason why, investments in distribution grids will play an important role as they will be the neutral facilitators that will guarantee the integration of the renewable production and will provide the system with the necessary flexibility.
Everything will not be possible without a competitive electricity price. As abovementioned, charges and taxes make the electrical option less attractive in comparison to other energy vectors, even though it is more efficient and less pollutant. So, if we want to meet our 2030 goals, we need energy taxation measures to correct the situation and progress with the decarbonisation.
Finally, I would like to stress that this regulation will remain as it establishes medium- and long-term objectives. That is the reason why we are confident it will get the social and parliamentary consensus.
Marina has a Master’s degree in Law and Philosophy from University of Zaragoza. She is part of the State Lawyer’s Corps since 1982, now on extended leave. She has been Secretary of the Board of Directors of Red Eléctrica de España and Director of its Law Consultancy, Adviser of the Spanish Energy Commission (CNE), First Vice president of Latin America Energy Regulators Association, General Manager of State Patrimony at the Treasury Department (2001-2004) and member of the Board of Directors of Abertis Infraestructuras, S.A., as an independent advisor. Now, she is Of Counsel at Pérez-Llorca Law Firm, President of aelēc, Vice-president of CEOE and member of OMEL’s Board of Directors.