Spain, a Rising Energy Powerhouse? — EU Must Cut Energy Costs and Cure Its Russian Gas Addiction

Written by | Friday, March 25th, 2022

Spain has big ambitions when it comes to supplying Europe with energy. It could be the linchpin transporting hydrogen between Africa and Europe, but first, it needs France to help finish a pipeline in the Pyrenees. With Vladimir Putin’s attack on Ukraine putting the Nord Stream 2 on ice for now, Europe’s energy security is in jeopardy. The new political situation also changes things for Spain in many ways. Its long economic ties to the Middle East and North Africa (MENA) and its many solar and wind energy parks are suddenly attracting new attention. The country also has six coveted liquefied natural gas (LNG) terminals, with the seventh under construction. At the same time, it is looking to strengthen links with Nigeria and other suppliers of raw materials. The Iberian country already generates more than 21% of its gross energy consumption from renewable sources and, therefore, does not currently have supply problems. Taken all together, many see this as a huge opportunity for the country to become a future European energy agent superpower.
Now the country wants to use the €140 billion from the European Union’s Next Generation Fund for the green conversion of its economy. This involves the production of green hydrogen. Ursula von der Leyen, the head of the European Commission, has been to Madrid several times and expressed her interest in reviving the MidCat Pipeline (Midi Catalonia) project, a gas link between Spain and France. If completed, the pipeline would have a capacity of 7.5 billion cubic meters of gas and could be the start of something bigger. Currently, there are only two comparatively small pipelines that transport gas from Navarra and the Basque Country to France. “It’s mainly about the financing. However, the failure of Nord Stream 2 has made the topic relevant again,” said Ignacio Cembrero, an expert on North Africa.
Confronted with galloping gas prices at home, Spanish Prime Minister Pedro Sánchez wants to make sure that green energy sources such as hydropower, solar and wind become more attractive again. Sánchez has now embarked on a European goodwill tour to promote his plan. He wants a consensus in the EU. Some market observers see a window of opportunity — economically and politically — for Spain. Others consider the goal to become an energy supplier to be illusory. In a recent interview with the Financial Times, Sánchez said the bloc faces an emergency and EU leaders must act to bring down energy prices to stop Europe becoming the “hostage” of Vladimir Putin and limit the economic damage caused by the war in Ukraine. “If the EU does not give us tools to respond to this energy emergency, it will be difficult for not just Spain but for all member states to bear the enormous economic cost,” the Spanish prime minister said, referring to Madrid’s call for electricity and gas prices to be decoupled — which would significantly reduce bills in Spain.
The prime minister also argued that Spain, which accounts for just under a third of the EU’s LNG storage capacity, could help the rest of the continent bolster its energy independence if connections to France were improved. He said this was part of Spain’s “great opportunity after the UK’s exit from the EU to position itself as one of the principal actors” in the bloc. But Spain’s relationship with its biggest gas supplier, Algeria, was strained when he implicitly backed the claims of Algiers’ regional rival, Morocco, to the disputed western Sahara region late last week. Algeria has now withdrawn its ambassador to Madrid. Meanwhile, Spanish Deputy Prime Minister Nadia Calviño has recently urged the European Commission to “revise” its energy regulations to help Europe “decouple” from Russian gas. She also argued that Europe urgently needed to find a way to disconnect the price of gas on international markets from retail electricity prices to stave off rising bills for the everyday European, and encouraged a greater focus on renewables.

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