Spain regulator slams decree that would halt power plant closures

Barcelona (Platts)--25 Jan 2018 922 am EST/1422 GMT

Spain's market and competition regulator CNMC has slammed a proposed government decree which effectively would allow it to block power plant closures, force their continued operation or oblige generators to sell unwanted plants via auction.

* Decree allows 'too much discretion, on shaky legal ground': CNMC

* 3 GW of closures would not affect system, report says

* Recommends focus on revising existing closure legislation

The official regulator's report on the draft decree published late Wednesday says that the proposals allow "too much discretion and are on shaky legal ground" and also fall outside of existing national and EU laws.

In November, the government published its proposals to halt plant closures "if this threatens security of supply or if it might result in unfavorable effects on electricity prices." The move followed an application by the country's largest generator Iberdrola, to close its last two remaining coal-fired plants in Spain, with a combined capacity of 830 MW.

However, in the report, the CNMC estimates that the Spanish system could easily absorb the closure of as much as 3 GW of coal-fired capacity by 2020 (or one third of existing capacity) without it materially affecting the system's balance.

This is firstly because the system has a supply overhang of roughly twice the peak national demand of 46 GW, but also because a further nearly 9 GW of renewable capacity (mostly wind and PV) is scheduled to come online before the end of 2020.

Spain's largest generators have also slammed the proposed decree for being unconstitutional and constraining free enterprise.

The owners of coal-fired plants have already been forced to decide which plants they want to operate beyond a 2020 deadline for emissions compliance, with only a handful having begun work on installing the required emission abatement retrofits.

One of these, Endesa, has complained that there is still not a clear enough strategy for it to reach conclusive decisions on two of its plants that have been earmarked for closure.

In its recommendations, the CNMC said that the government should focus on revising all the existing procedures for opening new plants, mothballing existing plants and permanent closures.

The report also slammed the proposed method of assigning unwanted plants by auction to a third party, arguing that if a company decides to close a loss-making plant, any likely investor would share the perception.

The possibility of offering incentives for continued operation would also likely contravene EU state aid regulations, it added.

--Gianluca Baratti,

--Edited by Jonathan Dart,

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