by Aída Sáez, Universitat Politècnica de València

The complexities of the Spanish electric sector and its relationship with energy poverty make up the subject of one of our main case studies for the InnoSi project. A few weeks ago, we interviewed leading Spanish industrial engineers and entrepreneurs within the energy sector in Spain, who helped to unravel some of the complex interrelations, handicaps and barriers that affect the transition to more available cleaner and cheaper energy, thanks to their years of experience in the sector.

These experts were able to confirm some aspects that we were already aware of, Such as the fact that, although the Spanish electric sector was liberalized almost 20 years ago, it continues to be an oligopoly, where large corporations are dominant with a market share of over 80%. The general sensation is that the sector is liberalized because of the existence of many commercialization companies, but in practice the money is still ending up in the same place. The majority of these commercial companies are cooperatives that are attempting to open up a new segment so that, at some point in the future, they can attempt to provide their customers with the means of being energy self-sufficient.

These large corporations have demonstrated time and again that they have the capacity to influence state-generated norms and legislation. The defence of their interests is legitimate, but if the government contoinnues to pay so much heed to the needs of large corporations, the regulation of the sector ends up seriously hindering potential competitors. It could be suggested that the government has never taken energy cooperatives into account. In general terms, the state does not put up barriers to their entry into the market, but neither are they enabling it, nor paying attention to their needs.

One expert comments that he sees cooperatives as an investment vehicle for renewable energy, as there is an increasing environmental awareness among the general population and people are even more willing to pay extra for clean energy. Cooperatives should also go further than commercialization, as their links with social activity and the change in the energy model is extremely weak, and they should therefore attempt to focus on production or distribution.

In addition, over the last ten years, the price of electricity in Spain has doubled, and is now one the most expensive in Europe and one leading industrial engineer in the sector cited various reasons,  such as the fact that the large electricity suppliers aim to maintain their profit margins, despite suffering a drop in the market share or greater penetration from renewable energies, which to date have not been accompanied by losses in the previously established electrical corporations. The rise in the price of electricity has not been due to the arrival of renewable energy, but more because of the fact that renewable energies need to wrest market share from traditional sources.

This situation has created serious problems for Spanish families to meet electricity costs, resulting in alarming levels of energy poverty. The European Commission defines energy poverty as “devoting more than 10% of your income to energy services regardless of cause”. Figures published in 2014 in the economic review el economista (eleconomista.com, 07/03/2014) suggested that over 5 million people in Spain live under conditions of energy poverty. Those who suffer energy poverty are generally low income families for whom the demand for energy is greater than it should be because of the poor insulation conditions in their homes. The reasons why so many people are suffering this situation are relatively clear.  You can see on any current electricity bill that, for example, if you consume 3€ worth of energy, the bill comes to around 50€ after tax, contracted power, and (obligatory) renting of equipment/ meters etc. For families with one earner on a minimum wage of 655€ or on the average unemployment benefit of 426€ (both cases are extremely common), the numbers simply don’t add up.

One way of reducing the cost of electricity would be self-sufficiency. Being self-sufficient in energy consumption today is not cheaper than buying electricity via the grid, but producing around about 30% of your own energy needs is more economical. This is even true bearing in mind that Spain has one of the most restrictive self-production legislative frameworks in the world. On the one hand, there are administrative barriers, the so-called sun tax which is charged for the production of solar energy and the management of excess energy produced. according to most of our experts, the opinion is that renewable energy is here to stay despite the fact that in Spain little or no progress has been made in the last 4 years, but this is not the case in the rest of the world where they are still being developed and introduced more cheaply, moving towards clearer models.

It is worthy of note that in other European countries, large electrical corporations are losing value on the stock market, while the large Spanish electric corporations are increasing their value. Spain needs a regulatory system that is capable of driving different legislation and does not conform to those imposed by the big players. You cannot expect to win simply because you are the largest, but in order to create the conditions for a fairer sector and cheaper electricity for those most in need, stronger government is fundamental.