Igancio Sanchez Galan, Iberdrola’s chief executive, says that the development of the European Emissions Trading System and coal prices will be a determining factor in the use of gas-fired plants in the Spanish power mix in the coming years.
“If the new ETS rules [carbon market stability reserve proposal] are implemented, this will push the up coal price and we may find that coal plants are closed before CCGTs,” Sanchez told analysts on a conference call.
Platts reports that Galan and other utility chiefs across Europe had been involved in the process of helping foster an EU-wide industrial renaissance in a competitive, cleaner EU, adding that he held out hopes for a 2017 start for the implementation of the power reserve.
The Spanish market has been oversupplied since a renewable boom in the late 2000s pushed out traditional coal-, gas- and oil-fired power stations.
Since then, gas and coal have competed in what is known locally as the thermal gap to provide back-up power to renewables.
Iberdrola had 3.4 GW of installed coal and 5.7 GW of installed gas-fired capacity at the end of 2014, according to company data.
Galan warned that the ETS would have to “work properly, which won’t happen if there are free allowances in the market.”
As many as 900 million backloaded allowances are due to come back to the market in 2019 and 2020, which could distort its function.
Either way, Galan said that a likely new mechanism would be sure to push up carbon prices and increase switching to gas without increasing the cost.
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