Aborda las claves de éxito de la transición energética en un texto coordinado por Pedro Mielgo y Miguel Marín FAES: Regulatory stability and an institutional framework are key to the energy changeover

07/03/2018

    _The regulatory stability and an institutional framework are key to the energy transition

    _Proposes a political agreement for governance system of the process, private sector driven and underpinned by economic efficiency and competitiveness

    _Suggests a Vice-Presidency to co-ordinate and assume the competences that are involved. The political agreement would guarantee its continuity over time

    _The energy changeover is a more profound and far-reaching model shift than any of the energy policy changes proposed so far

    _OBJECTIVES.-They are practically incompatible with anything other than a low-emission energy system.

    _It should be kept in mind that not all industrial processes are susceptible to electrification, which requires guaranteeing the supply of fossil fuels.

    _NETWORKS - A special attention because they are essential to the stability of electrical systems, the hardware of the markets and fundamental basis of the efficiency of the system.

    _SELF CONSUMPTION - Distributed generation will play an important role as technological development lowers costs and increases capacities.

    _ENERGY TAXATION - It is recommended to be reviewed in order to establish a stable remuneration framework and avoid increasing consumer costs.

The FAES Foundation ensures that the Regulatory Stability and Institutional Framework are key to the energy transition. For the governance of this process, it proposes a political agreement involving the private sector, underpinned by economic efficiency and competitiveness. It also suggests a Vice-Presidency to coordinate and assume the competences involved. This is stated by FAES in its recently published in Especial Papeles, Claves de éxito de la transición energética, coordinated by Pedro Mielgo and Miguel Marín.

FAES points out that the energy transition will require a rigorous decision-making process in which technical strictness, political consensus, regulatory success and the involvement of stakeholders must be combined. It is a profound and far-reaching shift in the energy model that is more comprehensive and extensive than any of the energy policy changes proposed to date.

The FAES report explains that 20 years after the initiation of liberalisation policies within the energy market, the European Union is proposing a new and ambitious step, driven by the fight against climate change. The energy transition involves transforming the energy mixture, pursuing the pre-eminence of renewable sources over fossil fuels and, in many cases, nuclear energy. This process must become an engine of social and economic transformation towards a fully' decarbonized' economy. Its targets are virtually incompatible with anything other than a low-emission energy system, and their achievement will require a radical transformation of the European economy.

NEW CHALLENGES
As indicated in the text, the main challenges of the energy transition are the following:

Redesigning a mixture of final energy and electricity generation to reduce GHG and other pollutant emissions without increasing final prices and maintaining the supply, which will require the introduction of renewables and the upkeep of nuclear generation.

-       Improve energy efficiency

-       Reducing the energy consumption of transport and its emissions

-       Develop new technologies and improve existing ones

In this regard, it should be borne in mind that not all industrial processes are susceptible to electrification, which requires securing the supply of fossil fuels. The role of networks also needs special attention, as they are the cornerstone of the stability of electrical systems, the physical supports of national and international markets and an essential basis for the overall efficiency of systems. FAES also stresses that distributed (self-consumption) generation has and will have an important role to play as technological development lowers costs and increases capacity.

THE GOVERNANCE OF THE PROCESS
The EU has established a very ambitious climate policy for the period 2030-2050, which can only be achieved via coordinated action. In addition, it will be an intensive investment process, hence political stability, consensus and coordination are essential, as well as, the governance and an institutional framework, which are key to guaranteeing coherent and complementary policies.

The first requirement is to draw up national plans: each country must design the governance model that responds to its specificities and European compliance. In a second phase, it is necessary to reflect on which agencies should support governments in sustaining and implementing the governance model.

RECOMMENDATIONS
A consensual and well-designed energy transition is a window of opportunity for industrial development, the report states. Therefore, policies should not be based on expectations but on the real availability and affordability of technologies. In this sense, Spain is the European country that has made the greatest economic effort in terms of the penetration of renewables, with per capita GHG emissions numbers that are significantly below the European average. On the other hand, and given that the energy transition is a national commitment as a result of a European agreement, its financing must be supported by all energy consumers.

The transition must be anchored in economic efficiency and competitiveness. The aim is to clean up the electricity bill and reform energy and environmental taxation. It must also focus on the minimum development cost - renewables incorporation must be carried out through auctions - and focus support for R&D on technologies in which Spanish industry can play a significant role in the long term. The success of the process also requires a previous successful design. That means having solid and unbiased analyses of investments, costs, technologies, prices... and discussing their risks in an open and politically correct manner.

In light of the aforementioned, FAES points out that the current Spanish institutional framework of competence dispersion,  legal conflict and tension between the regulatory bodies makes it very difficult to think that a process of the nature and scope of the energy transition can be undertaken. The expected consolidation of parliamentary fragmentation will require an extra effort of dialogue and agreement between political forces.

Therefore, these FAES Papers are unequivocal in stressing that the issue of governance must be considered in its broadest sense to make the process simple and inexpensive:

-       Define the role of the State. The experience has demonstrated better results and lower costs when transition policies are supported by the private sector and market mechanisms.

-       Designate a Vice-Presidency or governing body to coordinate, assume competencies and evaluate. The political agreement would guarantee its continuity over time

-       Taking into account the role of the private sector and giving priority consideration to the costs and risks of the process

-       Prevent any duplication of functions if you decide to create your own body

-       Attract capital with legal and regulatory stability

-       Support the use of existing assets to avoid waste. In particular, to extend the life of nuclear power plants

-       Thoroughly review energy taxation so that it establishes a stable remuneration framework and avoids tax excesses and increases in consumer costs.

Translated by: David Alonso Galera, Intern at FAES Foundation.

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