11 Oct The Motion of Defence regarding coal-fired power plants lacks justification and legal basis
On September 27th the Plenary Session of the provincial council of Leon approved a Motion of Defence of coal-fired power plants and indigenous coal, asking the Ministry of Energy to implement a preferential dispatch mechanism to prevent the closure of Leon´s power plants. This measure lacks justification and does not comply with the EU´s decision which prohibits maintaining this financial aid beyond 2014. This prohibition was an essential condition for the adoption of this transitional measure back in 2010. Moreover, the example contained in the motion concerning the alleged “preferential dispatch” mechanism used in countries such as Slovenia or Slovakia does not correspond to the facts, as the EU itself has requested for these subsidies to be cut off.
The adoption of this mechanism in Spain was an exceptional measure in the framework of the economic crisis, and it was planned to mitigate the losses suffered by most of the Spanish coal-fired power plants, which are not profitable. It was adopted arguing that it was necessary for security of supply reasons, even though according to estimates there is a 30% of overcapacity in the Spanish electricity system, well above what is required. The European Union allowed the measure on the condition that it would be a transitional measure to be applied only between 2011 and 2014. Beyond 31 December 2014, the EU would not permit more financial aid, stating in its Decision of 29 September 2010 that it would not be possible “even if the Royal Decree was modified”.
During the period in which this mechanism was in force, the Spanish Government estimated to grant a financial compensation of 1,300 million to keep the coal-fired power plants opened even though they were not necessary nor profitable. This aid, aimed to ensure the economic viability of indigenous coal, is funded through commercial taxes, which have an impact on the electricity bill, forcing consumers to overpay for electricity.
These measures imply artificially extending an unavoidable process. Coal-fired power plants are not economically profitable within the framework of Spain’s EU and International commitments, in particular the Paris Agreement. Governments should invest in measures which guarantee a just transition for workers rather than continuing to finance unprofitable units through consumer´s money. Moreover, the proposed preferential dispatch mechanism does not comply with EU Law. In case of adoption, the European Commission would probably block it, as it undermines the Rule of Law.
It should be noted that coal power plants emissions have a negative impact on health and environment, causing more than 700 deaths per year in Spain. Castilla y León is the second deadliest region with a rate of 3.41 deaths for every 100,000 citizens, only behind Asturias, according to IIDMA´s study “A Dark Outlook”.
Slovenia and Slovakia
The Motion of Defence explains the necessity to “urgently approve the preferential dispatch mechanism framework to protect the use of indigenous coal for security of supply reasons”, as stated in the Internal Market in Electricity Directive and allegedly as used by countries such as Slovenia and Slovakia.
The Directive mentions this measure as an exceptional mechanism to secure power supply. In the case of Spain, there is no risk concerning the supply provided that the electricity system has wide security of supply margins, estimated at 1.4, well above the 1.1 established as a reference. The EU is currently in an energy transition scenario and the emission limits are becoming more restrictive, regarding the “decarbonization” commitment for 2050.
In the case of Slovenia, despite the statement of Leon´s provincial council, there is no such mechanism, as it was repealed in 2014, and the new 2014 Energy Law no longer includes this kind of measures. As for Slovakia, it has a similar mechanism that has been yet reported before the European Commission by a Consumer Association claiming that it is illegal. In the same way, in February of 2017, the European Commission itself has published a report about Slovakia´s situation, highlighting the necessity to tackle this kind of aid, as it is environmentally harmful.