September 28th, after the Catalan elections, all the instances reacted to the political uncertainty that seems to open. The positions for independence reached the majority of seats but not in votes, meanwhile the economy and life continues in the energy market.

In this article, we will not discuss about the right to decide or give our opinion on the process. However, we cannot ignore that a process of this caliber could draw a new scenario for the industry and economy in Spain. The Spanish energy market aims to be part of the future European single energy market. But eventually, what would be the objective of an energy market in Catalonia? Still in energy sphere,what would the companies have to face to continue their normal activities in Catalonia as an independent country?

Everyone knows the importance of the Autonomous Community of Catalonia in both economic and industrial environment and wherein a good part of the Spanish energy infrastructure resides.

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Although Catalonia is not a leader in wind and solar generation, it has 3 out of 8 Nuclear reactors of the peninsula. A split of the generation mix in Spain could have significant effects. However many questions about whether an action of this type in Catalonia is feasible with just parliamentary majority

In theory, the fact of Catalonia becoming independent state could ensure to have self-regulatory capacity to adapt to the needs of the country. The result of the 27S opens a long, intense and difficult negotiation phase for effective independence without doubt. It is about getting agreements for the distribution of assets and liabilities. Regarding the restoration of sovereignty would have to agree to surrogacy agreements, management of borders with the State, transfers of officials, agencies and, of course, the key aspects of the energy system. We do not dare to estimate a time for all this to take place and not even just whether or not is feasible.

What is the new Catalan Government proposal?

Junts pel Si” argues that the Catalan energy system has to be a consumer-centric model, individuals or companies, in which the right of access to reliable energy supply, quality and fair and affordable price is guaranteed. This is a message that nothing differentiates current energy policies. To make it effective and without going into the details of how and when, the points proposed in the program are:

· New electric sector law that defines a new framework for energy markets of Catalonia and the principles set out above.

· Develop the bases of the new Catalan energy model and the measures to be taken in the medium, short and long term.

· Create a Catalan energy market operator, which will assume the management of the system power offers. The operator will have direct access to administrative records for production facilities and power distribution, as well as suppliers and direct consumers and coordinate their actions with the system operator.

· Create an energy  system operator, which manages the transmission network, ensure continuity and security of electricity supply and ensure proper coordination of production systems and transport system under the principles of transparency, objectivity and independence.

· Create an energy system operator for gas, which will ensure the proper management of the basic network and secondary transportation of natural gas, and act as an authority between individuals of the gas system.

· Create the Catalan energy system regulator, the functions of which will initially be undertaken by the Catalan Competition Authority (ACCO) until not definitively constituted.

· Create a commission of nuclear safety and radiation protection, which will be the reference of the International Nuclear Energy Agency of the OECD, the International Nuclear Regulators Association and the European Association of Nuclear Regulators.

· Modify the Catalan waste legislation to incorporate the elements of the management of nuclear waste; establish a monitoring and control system, and promote an agreement between Catalonia and France for the transfer of spent fuel.

There is a clear lack of specificity in the program. That is, the plans in the short they draw establishes a liberalized model of energy market as we have today, rewriting the rules for a free market without the historical burden (tariff of deficit, nuclear moratorium, interruptibility, subsidiaries to domestic coal …) that, for better or worse, is the reality that has set the Iberian market.

But these are mere steps to create its own structure and whose outcome will depend greatly on the availability to recognize, negotiate and accept by the Spanish Government the authority of a new independent state.

But let’s go a little further. What about long-term plans?

In Catalonia as in Spain, there’s a clear lack of primary energy resources and, therefore, the country’s energy policy will always be one of the basic pillars to consider in the new state. This actually just sets for herself the need for efficiency, saving and reducing the energy intensity of our economy as a priority and permanent objectives.

Like other neighbouring countries, in Spain, we have an excessive fossil energy dependency and despite being a Mediterranean country with sun and wind, the development of renewable energy is clearly insufficient. Today dependency is 75% fuel, 20% nuclear energy and 4% renewable energy. From the demand side, 69% of final energy consumption allocates the transport and industry, 16% to the domestic sphere, 13% in the services sector and 3.5% in the primary sector.

The energy structure, both the part of the supply and the demand is rigid and can not change significantly in the short term. Therefore, they should improve in the future, in collusion with the group of companies in the sector to meet the European Directive of 20/20/20 i achieve by 2020 the known emission reduction of greenhouse gases, taking also 20% of renewables in global energy consumption and increase efficiency in order to generate savings of 20%. On the other hand, you have to lay the basis for the more ambitious targets, also in line with the European Union, with a view to 2050.

Furthermore, energy policy is the fundamental piece for Catalonia to progress towards an economy of low carbon and thus contribute to the fight against climate change.

The transition to an energy market Catalan intends to continue with the program established in Spain in which the European Guidelines assume the future energy development. Although draws, in theory, a somewhat less attractive outlook for energy companies to be considered part of the problem of an insufficiently competitive market. This process will aim to follow European directives which requires effective competition open to the generation, distribution and sale of electricity, but the transposition of the same by the Spanish state has been, in their opinion, inappropriate and has not been achieved alter the oligopolistic market structure.

It is intended to correct the current keeping of a market considered oligopolistic with formation of not very transparent prices, at the discretion of a regulated costs accounted for 50% of the electricity bill paid by the user, and have been generated by a bulky tariff deficit which will further increase prices that are already among the highest in Europe. All this through the following measures:

· A national agreement between institutions and economic and social people in 2050 for 100% renewable generation. A measure that raises many questions. Currently there is no country that can operate with 100% renewable energy.

· Addressing the new regulation based on the effective implementation and strict enforcement of European directives as to create a competitive energy market.

· Join the future European single market that has the horizon to set the same price of electricity throughout the European level, considering the facility to Catalonia given its potential interconnection with the European network.

· Avoid conflicts of interest between different market players pushing the legal and structural separation of generation, transmission, distribution and marketing.

· Promote evolution towards a distributed electrical system, removing the barriers to entry for small, public and private producers, and promoting the consumption of energy, especially from renewable sources. This program does not contemplate to bear the proportionate share of the tariff deficit load.

· Pose appropriate scenarios to decide the Catalan nuclear policy in the context of the transition to production with greater weight of renewable energy and prioritization of low-carbon economy, since the plants in Catalonia meet the 40 years of operation in mid the next decade.

· Promote energy efficiency in all environments, especially in industry, transportation and home.

· Promote a public audit of the legitimacy of the costs of transition to competition and the tariff deficit paid by users of Catalonia.

· Establish the means to ensuring access to energy by citizens who are in a situation of economic vulnerability.

· Convert the Catalan Institute of Energy in Energy Agency of Catalonia is comparable to European public agencies in this area.

Conclusion:

The process defined by the nationalist parties for a hypothetical independent Catalonia stems from a lot of assumptions and challenges. On the one hand, strictly Iberian area and by which the Spanish Government complies to negotiate a segregation of a major part of its energy infrastructure, as well as recognition of the payment of a debt (CTC’s, tariff deficit …) to while interconnections are maintained. On the other hand, recognition of the European member countries, especially France which aims to develop a plan for development in the medium term and to enter negotiations over ownership of energy interconnections.

Following the guidelines of the White Paper on the National Transitional Catalonia, the program “Junts pel si” insists on presenting a future with a electricity 30% cheaper than the Spanish one. The most novel aim is to an ambitious 100% renewable energy mix by 2050.

The configuration of an ideal energy model market, voluntarist, with enough lack of specifies and the consideration of other countries accepting the conditions as described make the energy chapter of the White Paper on Transition challenging. The idea of creating an ideal market, without having to pay the bill for a transition to free market as did the Iberian one, is difficult to believe. While it is true that whatever the new scenario, companies will have to keep buying in a liberalized market and prospects for a long-term plan defined by the EU. However, there are still many unanswered questions that will be clarified but not without great challenges and difficulties.

Alejandro de Roca | Operations Director

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