Today we are talking about the General State Budget (GSB) for 2021, approved last Tuesday by the Council of Ministers. The surprising thing is that, compared to last year’s GSB, we are facing a record increase in public spending. This has been the decision of the Council of Ministers, which has been forced to take all the efforts to recover from the crisis of the pandemic. There is no need to point out that all this has been possible thanks to the consistent support of the European Union, with its Next Generation EU recovery plan, which sees Spain as one of the European countries that has benefited most.
In this article, we will go into detail about the energy transition policy and how the government proposes to invest the GSB allocated to this sector. The EU’s energy transition objective is very clear, so that the country will have to invest funds towards an energy policy of which the European mother can be proud. Will Spain be able to achieve these objectives?
Record of European funds towards the PNIEC targets
As established in the GSB, 21% of European funds will be allocated to the industry and energy sector to support the transformation of the Spanish productive system. Between the national budgets and the contribution of the EU, we are talking about a total of 11,935 million euros that will be allocated to green policies that will enable to reach decarbonisation and the circular economy objectives. With respect to 2020 GSB, we record an increase of 141%, as we come from less than 5 billion euros. This year, the majority share is due to the 6,805 million euros provided by the EU which, added to national resources, generates almost 12 billion euros of budget for the energy transition section.
We recall that 2021 represents just the beginning of the Winter Package, according to which the different European countries start a period of complete reform and decarbonization of their main sectors. The objectives, published throughout the period 2016-2019 with 8 directives by the European Commission, are very ambitious and set a commitment of energy transition for all the member states towards the following global targets:
- Energy efficiency: +32.5%.
- Renewable energies: +32%.
- Reduction of GHG emissions: -40% (current proposal -60%)
Last year, Spain itself presented its National Integrated Energy and Climate Plan (PNIEC), determining the country’s specific objectives, with a Minister for Ecological Transition, Teresa Ribera, more than determined to develop European policy towards renewable energies:
Image 2 – Renewable installed power 2020-2030 Source: PNIEC
The Green Recovery Plan
What is certain is that the government’s intention to achieve energy transition goals has been partially compromised by the arrival of Covid-19. In previous articles, we have already talked about how many renewable technology projects were damaged in the midst of a global health crisis. However, both the International Energy Association (IEA) and the International Renewable Energy Agency (IRENA) state that renewables have to be main characters in the stimulus packages to revive economies, as they offer opportunities to create jobs and activity and contribute both to the development of more efficient energy systems and to emissions reduction.
In fact, Spain itself implements this logic in its post-Covid-19 recovery plan and the 2021 GSB are a clear example. According to the draft budget, the government considers that the four pillars of the recovery plan are based on digital transformation, ecological transition, territorial and social cohesion and need for a feminist agenda.
Looking at the main interest of this article, on the ecological transition side, the GSB point out that this must be aimed at a sustainable economy, focused on the preservation of the environment. Key tools will be the promotion of the massive deployment of the renewable generation park and the electrical infrastructure, including smart grids and storage. For this point, financing and loans to the IDAE are established in favour of those subjects interested in investing in renewable projects.
In particular, in the field of the environment, during 2021 actions to prevent pollution and climate change will be carried out, in line with EU provisions. In fact, one of the points of the GSB for next year is the increase of the diesel tax, following the EU and OECD recommendations on environmental taxation. The tax is expected to increase from 30.7 to 34.5 c€/l, with an impact of 500 million euros, according to the government estimation.
GSB for the electro-intensive industry
We have already discussed about how the electro-intensive industry has been damaged in the midst of a radical change in the Spanish energy sector. This time, it seems that the government has saved space in the GSB 2021, considering this sector as the one that most needs support to maintain its competitiveness.
The aim of this aid scheme is to compensate for the costs of CO2 trading and the premiums for renewables.
For this first point, 109 million euros have been budgeted for 2021. The Government has already taken the decision to pay the maximum amount of compensation for electricity overcosts resulting from the implementation of GHG emission trading in 2019, a maximum authorised by the European Commission of 300 million euros in 2020.
In addition, to help reducing costs in its electricity bill, an item of 91 million euros is proposed to offset the costs passed on in the charges for financing renewables, cogeneration and non-mainland costs, exactly the same amount as in the draft Statute for Electro-Intensive Consumers.
To this must be added the 110 million euros budgeted under the Recovery and Resilience Mechanism, thus totalling 320 million euros by 2021.
Without doubts this year the country has had to face numerous challenges in all sectors, caused by an invisible enemy of unexpected strength. Recovery from the Covid-19 crisis has yet to begin, but it seems that Spain is not facing this challenge alone. The huge amounts of aid provided by the EU leave a small gap hole between clouds that have been covering us since March, but which have also “illuminated” us in the face of the common need for an energy sector that is more committed to the ecological transition.
Intentions seem good and the 2021GSB are a clear sign that we are moving towards a green recovery. Will the EU finally be satisfied with its Spanish daughter?
Cristina Vitale | Energy Consultant