The big pulse for the financing of energy networks

The revision of the regulatory framework of electricity networks in Spain has become the great pulse of the energy sector in full ecological transition towards a less polluting economic model. Private companies, Ministry of Ecological Transition and National Commission of Markets and Competition (CNMC) agree in pointing out in a meeting organized by THE WORLD and Expansion the importance of modernizing and digitizing the electrical infrastructure to achieve meet the green objectives set by Europe , but disagree on how it should be done and especially on how much this revolution will cost consumers.

The CNMC, which opens regulatory powers this year after its return by the Government, has proposed a modification of the pay system of the networks that marks a financial rate of return of 5.58%. In addition, the regulator excludes the remuneration of several assets when considering that they are amortized. Both measures represent an adjustment of 7% with respect to the current framework.

The publication of draft drafts last July sank the price of electricity companies on the stock exchange and unleashed uncertainty in the sector. In just a few days the capitalization of the main energy groups was reduced by more than 5,000 million euros. But the crucial moment is now, when once the allegations of the companies and the Ministry of Ecological Transition have been received, the CNMC must decide whether to vary their numbers or approve the preliminary version for the 2020-2025 regulatory period.

«It is essential to succeed in the new remuneration framework to give the correct investment signal to the sector for the next six years. We ask for a fair, visible and stable profitability for the digitalization and modernization of the network, because the decisions we make today will jeopardize our future ”, highlights Raúl Suárez , director of Unión Fenosa Distribution, during his speech at the forum 'El Role of the Electric Networks in the Energy Transition '. This company is one of the most penalized for the cut on the electrical distribution and, above all, on the distribution in the gas system. At the CNMC they share their concern, but insist that the investment should combine with the interests of consumers who ultimately pay their bill. «We are analyzing all the allegations. We know that the change has generated controversy, but in reality we are continuous and we adhere to the regulatory revision contemplated in the Electricity Sector Act of 2013. The old norm established as a criterion of remuneration the Spanish bond to 10 years plus 200 basic points [today it would be equivalent to 2.2%], but we have chosen to add more to the methodology and hence 5.58%. There are no black beasts, ”replies María Fernández , vice president of the CNMC. The new figure, however, represents a reduction with respect to the 6.8% contemplated for the 2013-2019 period.

Alberto Amores , partner of Monitor Deloitte, believes that it is necessary to fine tune the new regulation to encourage the most necessary investments and meet the goal of 40,000 million euros until 2030 set in the latest Energy and Climate Plan prepared by the Ministry of Ecological Transition “There is no doubt that we must invest in networks, not only in extending the current infrastructure, but in digitalizing and modernizing it because we are going to see in the sector things very different from those we have seen in recent decades, such as consumers who they are able to generate their own light and pour it into the network or three million vehicles that need electricity, ”he says.

From the Administration they contemplate a change of pattern with respect to the current model in which it is not paid so much to install more network but to fulfill objectives. «We have to adapt the signals to the new energy system. Regulators have to be creative, rewarding companies not so much for installing more iron but for meeting those goals, ”says Joan Groizard, general director of the Institute for Diversification and Energy Saving (Idae). In the Ministry they agree on the "disruptive" rethinking of the current energy model. “We need a sufficiently remunerative framework that is efficient and does not stop innovation, but that is not excessive for consumers either. That goes in line with Europe, but also attend to the peculiarities of the territory, ”says Manuel García, deputy director general of Electricity.

Much of the energy transformation of the Spanish economy goes through its electrification. That is, the use of this energy source as the country's main engine compared to other fossil fuels derived from oil. The Government's plan sets an objective of energy use of electricity of 30% by 2030, eight points more than the percentage registered in 2018. «Accelerating the transition means betting on electrification, and little we do to achieve this. We believe that the objective set in the energy and climate plan could be superior, ”explains José María González Moya, general director of Appa Renovables.

Another of the great legs of the energy transition goes through a thorough review of taxation. «It is the main tool to achieve the objectives and get a good use of energy. The concept of the polluter pays is fundamental, and in Spain we still do not apply it despite the warnings of Europe, ”explains the manager of the green employers. González Moya also points to the electricity bill, on which a large battery of different taxes falls, such as the Electricity Tax, VAT or taxes on electricity generation. From the public sector they ask for prudence: «Downloading the electricity bill means charging other things. We have to have a debate on taxation, with costs that we have to cover, ”replies Groizard.

In the same vein, the CNMC vice president says, pointing out that the energy transition actually started in 2016 after achieving the financial balance of the electricity system: «Taxation is a complex issue that must be treated very carefully. It is designed around an economic model of the 20th century based on oil ».

In the end, all participants in the meeting agree that the changes should have the consumer as an epicenter. That is, that he is able to perceive what is happening around him and benefit from changes in both price and quality of service. "The customer will cease to be only accepting price, to become a producer of electricity at the domestic level, with storage service and capacity to reduce its power a few hours a day in exchange for reductions in the bill ...", explains the Deputy Director of Electricity of Ecological Transition.

«The energy transition must be done with the consumer. Not only do you have to decide if you want a plate on the roof of your house, but make a comprehensive reform in your home to make it more efficient or change cars to an electric model. These are major words because they are very relevant costs, and taxation can help to compare in price the polluting solution with the one that does not pollute, ”adds Alberto Amores of Deloitte.

The problem for the head of Idae, Joan Groizard, is that the idea of ​​the energy transition does not just penetrate the bulk of society. «The electric car and the solar panel already come out economically, but people still do not consider the investment. However, the new Iphone is worth more than 1000 euros and nobody questions how long it will take to pay it off before investing in something that will never recover. It is important that the consumer can make decisions as easy as possible, ”he says.

«Distribution networks are essential for a real transition. For this, the distributor needs to become the protagonist of a much more complex system. Luckily, the high penetration of smart meters puts us in a privileged situation with respect to Europe to meet the challenge, ”concludes Raúl Suárez. The CNMC will approve in the coming weeks the final version of the regulation and the swords remain high.

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