Power-Gen Europe was a good opportunity to practice my Spanish (which in truth still remains virtually non-existent). It was also a good opportunity to re-visit some issues from last month’s editorial, something which I seldom get a chance to do.
The Spanish power sector was the subject under discussion at an executive plenary session at this year’s conference held in Barcelona. As one of Europe’s largest and fastest growing power markets, the shape that Spain’s power sector will take is of great interest to industry observers.
According to Pedro Larrea, senior vice president of energy management of the electricity business within Endesa Group, Spain needs about 2500-3000 MW a year for the next few years to catchup with its already stretched generation system and to keep pace with predicted demand growth. Previous press announcements have stated that Spain plans to add 26 000 MW by 2008. But Larrea put this into context. “With this amount of power there might be a question of overcapacity by 2008 but experience shows that announcements do not always match what actually happens. In actuality, there will probably by around 15 000 MW of combined cycle capacity added between 2002 and 2008. It maybe 16 or 17 000 MW.” Larrea noted that Endesa plans to add 4000 MW between the 2002-2008 period at a cost of about g2 billion. For the islands around Spain, Endesa is adding about 1000 MW of small scale plant every five years. Meanwhile, Angel Chiarri, managing director of energy management of Iberdrola Generación, said that Iberdrola plans to add some 13 000 MW.
Although everyone welcomes such significant plans for expansion, especially in Europe where growth opportunities are limited, it is Spain’s seeming over-reliance on wind and gas that causes concern. Iberdrola’s plans for new capacity – which like most power companies is being driven by environmental policy – will take the form of 7000 MW in CCGT plant and 6000 MW of wind.
Matt Brown, principal consultant at UK-based ILEX Energy cautioned: “Looking at the impacts which are key to investment over the next five years; high oil prices and the knock on effect on gas and generation cost will be important in a market like Spain. It has a regulated tariff and whether the increased costs can be passed through to electricity prices will be quite important when looking at investment potential. The other concern is security of supply. It’s a question of whether security of supply can be realised with increasing wind generation and increasing dependence on gas.”
Larrea explained: “There is a limit to the amount of wind power that can be used in a system – perhaps 25-30 per cent. Spain has plans to generate 30 per cent of its electricity from wind by 2012. That is great. But what about the other 70 per cent? It should be an even mix of coal, gas, nuclear etc.”
This view was echoed by the equipment supplier on the panel, Antonio Oporto, country president of Alstom: “People forget the importance of coal, especially in Spain where it can be very dry for long periods. And with regard to Kyoto obligations, the authorities should not follow short term trends. They should look at the self sufficiency of the system and flexibility in generation.”
Chiarri described the landscape as a new world where “the industry needs to look still further ahead, beyond 2020. We cannot disregard nuclear and we have to look at new technologies. Maybe coal will be the new reserve power. The government will impose the type of generation. Our problem is how to transfer costs. The government’s long term goal is to reduce emissions. The National Allocation Plans and the Emission Trading Scheme is the EU’s scheme for reducing emissions but it is a scheme for the short term.”
Perhaps we need to go back to the basics in order to see what will happen in the future. Consumers want four things at the same time: security of supply, quality of supply, environmentally friendly power production and a cheap price. The government has the problem of providing a framework to deliver all these things.
Larrea commented: “We all look at the cost of wind power as being in the range of g50-55 per MWh but this is not true. Every megawatt of wind requires one megawatt of thermal plant as reserve. How much is the customer willing to pay for this?”
The main message from the discussion seemed to be that ‘you can have it in green, Madame, but it will cost you more’.
Larrea best summed up the task that lies ahead for his country; and indeed the rest of Europe. In the words of the great Dr. Martin Luther King, he said: “… I have a dream to provide clean power, reliable power and at low cost… but don’t ask us to do it by 2005.”
Amen to that.
Junior Isles, Publisher & Editorial Director