Can Spain be Europe's energy powerhouse?
March 23, 2022
With Vladimir Putin's attack on Ukraine putting the Nord Stream 2 gas pipeline on ice for now, Europe's energy security is in jeopardy.
Though far from the fighting, the new political situation also changes things for Spain in many ways. Its long economic ties to the Middle East and North Africa, and its many solar and wind energy parks, are suddenly attracting new attention. The country also has six coveted liquefied natural gas (LNG) terminals; a seventh is under construction. At the same time, it's looking to strengthen links with Nigeria and other suppliers of raw materials.
The Iberian country already generates more than 21% of its gross energy consumption from renewable sources and, therefore, does not currently have supply problems. Taken together, many see this as a huge opportunity for the country to become a future European energy superpower.
Bringing MidCat back to life?
The fact that Spain is too dependent on tourism was driven home during pandemic lockdowns and the accompanying travel restrictions. Now the country wants to use the €140 billion ($154 billion) from the European Union's Next Generation Fund for the green conversion of its economy. This involves the production of green hydrogen.
Ursula von der Leyen, the head of the European Commission, agrees with the plan. She is also interested in reviving the MidCat Pipeline (Midi Catalonia) project, a gas link between Spain and France. After building 80 kilometers (49.7 miles) of the pipeline on Spanish territory, construction work stopped in 2019. If completed, the pipeline would have a capacity of 7.5 billion cubic meters of gas and could be the start of something bigger. By comparison, Nord Stream 1, which runs through the Baltic Sea, can handle 55 billion cubic meters of gas a year.
Spanish Energy Minister Teresa Ribera recently criticized France because it does not want to take part in reviving the MidCat project. Currently, there are only two comparatively small pipelines that transport gas from the northern Spanish region of Navarra and the Basque Country to France.
"It's mainly about the financing. However, the failure of Nord Stream 2 has made the topic relevant again," said Ignacio Cembrero, a Spanish journalist and expert on North Africa.
Bringing down energy prices at home first
However, Spanish Prime Minister Pedro Sanchez must first bring his own country's energy prices down in the short term. Many households are suffering as the country has been plagued by the COVID-19 pandemic, snow disasters, inflation and now extreme drought.
The value-added tax has already been reduced on electricity, but that's not enough for the opposition in government. Confronted with galloping gas prices, Sanchez wants to make sure that green energy sources such as hydropower, solar and wind become more attractive again. Sanchez has now embarked on a European goodwill tour to promote his plan and find consensus in the EU.
Some market observers see a window of opportunity — economically and politically — for Spain. Others consider the goal to become an energy supplier as illusory.
"It is clear that by 2025, thanks to our numerous wind and solar parks, we will be able to achieve a megawatt price of €50 for electricity, while Germany and France will be paying between €60 and €70," predicted Luis Merino, editor-in-chief of Energias Renovables magazine, based on data from the Spanish electricity market operator OMIE. This would indeed make the country more attractive as an energy exporter.
Changing strategy needs time
Spain already has some experience in transporting energy. In January, the country exported more electricity to France than it imported.
"Due to our low population density, we also have the opportunity to build more hydraulic systems and to invest in sources such as geothermal energy," said Roberto Gomez-Calvet, an energy expert at the European University of Valencia. "But the strategy of the current government, which is fundamentally right, will take years."
He believes leaving coal behind a few years ago was a mistake, given the current situation. Spain has five nuclear power plants in operation, and these are set to be taken off the grid in the coming years.
"That's out of the question at the moment," said Gomez-Calvet, adding that would particularly be the case if Spain wants to be a true energy exporter.
Mallorca's green hydrogen factory experiment
The energy expert called the production of green hydrogen too expensive and not efficient enough.
"But there doesn't seem to be any other option on the table at the moment to replace the missing oil and gas," said Gomez-Calvet. That is why the first green hydrogen factory has just gone online in Mallorca, acting as an industry guinea pig. "At the moment, it's still a kind of laboratory."
For Sanchez's dream of turning Spain into a major energy producer to come true, gas would have to be imported from the United States on a massive scale, according to Roberto Centeno, a former manager at the Spanish gas company Enagas.
"Previously, we wanted to connect to France, but to bring Russian gas to Spain, not the other way around," he said.
Spain currently has 35% of the EU's liquid gas reserves. Portugal, which also has a liquid natural gas terminal, supports Sanchez's dream and has spotted an opportunity for its own country to invest even more in alternative energies.
Journalist Ignacio Cembrero doesn't just see advantages in the current geopolitical situation — in fact, the North Africa expert said, problems are just around the corner. "The gas connection from Algeria to Morocco, which Spain used to cover part of its gas requirements, was blocked because of political disputes. By resuming energy relations with Algeria, Morocco and Spain are opening up a can of worms like possibly supporting Islamist terrorists in Africa and the status of Western Sahara."
This article was originally published in German.