Spain: Loyola and Energy

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	ENERGY Spain's energy sector a pioneer in Europe JosÈ Folgado Blanco Secretary of State for Energy, Industrial Development, and SMEs The energy sector in Spain is undergoing a necessary evolution in order to achieve security of supply for the future. One of the government's main priorities has been the liberalization of the market; this process started in the late 1990s, and from the beginning of 2003 consumers have been able to choose their own energy suppliers. Spain is one of Europe's chief protagonists in the push for a more open environment and has surpassed the liberalization requirements laid down by the EU. JosÈ Folgado Blanco, Secretary of State for Energy, Industrial Development, and SMEs, says, "I believe that we can say that 40 percent of electrical energy and nearly 80 percent of gas is on the market - the process is going very well." Oil has traditionally played a major role in the Spanish energy sector and the country is Europe's second largest liquefied natural gas importer behind France. Natural gas is expected to account for a much larger portion of total energy consumption in future; the consumption rate went from 2 percent in the 1970s to 12.8 percent in 2001. Exploiting renewable energy sources is also a key facet in Spain's energy strategy. "Spain is one of the main leaders in renewable energy and has developed very important technologies," says Loyola de Palacio, Vice President of the European Commission. Loyola de Palacio Vice President of the European Commission. The country's remarkable progress in this area saw it overtake the U.S. in 2003 as the best renewable energy investment market. One major element which has boosted its standing is the use of wind power. Spain boasts more than 3,337 megawatts of installed wind capacity, ranking it second in Western Europe after Germany. "Wind power production in particular and renewable energy in general in Spain is reaching up to 17% of total Spanish production. This is a figure which fifteen years ago was unthinkable," says Pedro MarÌa MeroÒo VÈlez (INTERVIEW), President of the National Energy Commission (CNE). Exploring renewable energy is an essential means of combating energy dependency in Spain, which currently stands at 70 percent due to the country's heavy reliance on foreign suppliers of primary fossil fuels. More use of nuclear energy could be one solution to energy dependence both in Spain and Europe, but Mr. MeroÒo points out that the lack of social acceptance is a major obstacle. Spain's current national energy plan, which runs until 2011, does not foresee any new nuclear power plants. Another way to reduce dependence is energy-saving, which is being strongly promoted by the European Commission. "On this point we are well behind the efforts other countries have made," admits Mr. MeroÒo. However, Spain's good relations with Mediterranean countries mollify the dependency problem. "The fact that we maintain good business relationships with Morocco, Algeria, Libya, Egypt, and through the Suez Canal is a basic reason for us not to worry about supply security," says Mr. MeroÒo. Spain occupies second place in world wind energy generation behind Germany (Photo: Gamesa wind energy park) To secure transparency of prices, quality of service, and reliable supply for all consumers - from industry, through SMEs, to households - the European Commission has called for a single, well-regulated energy market to be established in the E.U. by 2005. As part of this initiative it has established an energy infrastructure plan to stop bottlenecks in supply lines between countries. Spain backs this pan-European stance. Improving infrastructure on a national basis has been key to meeting the increasing demand for electricity in Spain: the country has the fifth-largest electricity market in Europe and it is estimated that demand will increase by up to 30 percent by the year 2010. The Spanish Electricity Network (REE) is responsible for the technical management of the country's electricity system. A global pioneer, it was the first company in the world dedicated exclusively to the transport of electricity and system operations. Since REE was founded in 1985, its role within Spain's electricity infrastructure has been vital, and was even more so when liberalization was introduced. "The capacity of the Spanish network to adapt to the new set-up was key in the functioning of the market from the first day," says Pedro Mielgo, President of REE. "You have to remember that other countries have taken two or three years to prepare - Spain did it in three months, without failures; 95 percent of the reason for that was REE." Spain's leading electricity firm is ENDESA, one of the major private electrical groups in the world. While it is also the country's second-ranked gas company, electricity accounts for 93 percent of Endesa's business and in this sector it boasts more than 20 million clients in 12 countries. ENDESA is currently following a strategic plan that stretches to 2005 based on the improvement of efficiency and profit, the search for new business, and an investment program for expansion. ENDESA also wants to increase its gas sales and services in Europe. The search for sustainable energy is high on the group's agenda - ENDESA already accounts for 20 percent of renewable energy and cogeneration (the process by which heat for industrial production is also used to generate electricity). Rafael Miranda Robredo CEO of ENDESA INTERVIEW ENDESA was the first company to market energy to customers and has done so since 1998. Asked whether he believes that the liberalization of the electricity market has worked, Rafael Miranda Robredo, CEO, says, "There are a lot of theories on how to measure the success of a liberalized market - some base it on the number of clients who change their provider, others on the economic consequences in terms of prices. In my opinion, the most important thing is not how many change their supplier, but the freedom to change itself." He continues, "The Spanish power sector is now among the most efficient worldwide." Private utility Iberdrola is another leader in the Spanish electricity sector and serves 16 million customers worldwide. It also generates, transmits, and distributes natural gas. Iberdrola has committed to investing US$9.9 billion in the development of the national energy system for the period 2002-2006, and its strategic plan for that period foresees international investments of around US$4.4 billion, essential to the building up of its generation parks in Mexico and Brazil. Like ENDESA, Iberdrola prioritizes the provision of renewable energy: it is Spain's leading builder and operator of wind farms and developer of combined-cycle facilities. Gamesa Technology Corporation is also playing a key role in Spain's renewable energy sector. In recent years it has become a major promoter of wind farms and continues to be one of the most experienced builders and maintainers of wind farms on the international market. In 2002, Gamesa rose to fourth place in the world ranking of wind turbine manufacturers, with a market share of almost 12 percent.