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ENERGY

Spain and Portugal present their ‘energy island’ plan for cutting electricity costs

Spain and Portugal on Thursday sent Brussels their joint proposal for lowering electricity prices in the Iberian peninsula to a maximum of €30 ($33) per megawatt hour, Spain’s ecology minister said.

Spain and Portugal present their 'energy island' plan for cutting electricity costs
Spain's Prime Minister Pedro Sanchez (L) and Portugal's Prime Minister Antonio Costa speak ahead of a meeting as part of a European Union (EU) summit at EU Headquarters in Brussels on March 25th, 2022. (Photo by JOHN THYS / AFP)

The move came a week after the European Union agreed that Spain and Portugal could deviate from the bloc’s rules on energy pricing to ease the impact of energy prices on consumers.

Spain and Portugal are in a strategically advantageous position in that they’re not as dependent on Russian natural gas as many of their European neighbours, importing most of it from Algeria and other countries.

Spain is also the country with the largest gas storage and regasification capacity in Europe and together with Portugal is a renewable energy leader in terms of solar, hydraulic and wind power. Their energy markets are more self-sufficient and extremely well connected between both nations.

This has led the two countries that form the Iberian peninsula (as well as tiny Andorra) to be referred to as an “energy island” by Spanish Prime Minister Pedro Sánchez and his Portuguese counterpart António Costa, as a simplified way of describing why their countries should be temporarily released from the EU’s common market rules.

The decision to grant Spain and Portugal “special treatment” came after their efforts to convince Brussels to decouple electricity prices from the gas market fell on deaf ears.

“We have a joint proposal… and we’re working with the European Commission” to push it through, Teresa Ribera told reporters.

The proposal involves capping the price of gas used for the generation of electricity to the equivalent of “€30 ($33)” per megawatt hour, she said.

Such a cap, which would significantly reduce the price of electricity on the wholesale market in both countries, “is one of the technical elements of the proposal we need to discuss with Brussels”, she said.

Prices are particularly high in the Iberian peninsula, with both Spain and Portugal heavily dependent on gas to produce electricity.

Prices have risen sharply in both countries in recent months due to the rules governing Europe’s electricity market which obliges producers to sell electricity on the wholesale markets at a price determined by the most expensive production costs — that of gas-fired power plants.

READ ALSO: Is Spain ready to be the EU’s main natural gas supplier?

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SPAIN AND MOROCCO

Spain starts sending gas to Morocco after Algeria spat

Spain has started sending natural gas supplies to Morocco through the Maghreb-Europe gas pipeline (GME) to ensure its energy security following a supply crisis with Algeria.

Spain starts sending gas to Morocco after Algeria spat

“The first shipment via the Maghreb gas pipeline took place (on Tuesday) involving LNG (liquefied natural gas) which Morocco bought on the international markets and unloaded at a Spanish regasification plant,” a source at Spain’s ecological transition ministry told AFP.

In February, Spain said it would help Morocco address a gas supply shortage by letting it ship LNG to a Spanish regasification plant which could then be transferred to Morocco via the GME pipeline.

The GME pipeline, which crosses Morocco, had previously been used by Algeria to transport gas to Spain.

But in October, following a diplomatic spat, Algiers refused to renew a 25-year deal with Rabat to use the pipeline.   

Morocco had been receiving around a billion cubic metres of gas per year as transit fees, covering around 97 percent of its needs, so Algeria’s move directly impacted on Rabat’s energy supplies.

Algiers, which in the first quarter supplied about 25 percent of Spain’s gas imports, had in April warned Madrid not to re-export any of its supplies to Morocco, warning it could endanger its own contract with Algeria.

“A certification scheme guarantees that this gas is not of Algerian origin,” the Spanish ministry source said.

Spain’s Enagas, which operates four LNG terminals and the national gas grid, “will check the origin of the methane tanker carrying the gas” acquired by Morocco “and after unloading will issue a certificate”, ensuring that no other gas is exported, the source said.

Tensions peaked between the North African neighbours last year following Morocco’s renewal of diplomatic ties with Israel and Washington’s recognition of Rabat’s sovereignty over disputed Western Sahara.

Diplomatic ties have also nose-dived between Spain and Algeria after Madrid reversed its decades-long stance of neutrality on Western Sahara, agreeing to back Morocco’s autonomy plan for the disputed region to end a year-long diplomatic spat.

Spain’s move, widely seen as a victory for Morocco, infuriated Algeria, which backs the Polisario Front, Western Sahara’s independence movement.

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