As winter looms, Spain passes new package of energy sector reforms

By Alyssa McMurtry

OVIEDO, Spain (AA) -The Spanish government passed a new package of energy sector reforms on Tuesday ahead of a winter in which Europe could face major challenges supplying affordable energy to households and industry.

The headline measure is reducing the sales tax on natural gas, firewood, and pellets from 21% to 5% for all consumers.

The government is also embarking on a structural reform that specifically aims to support Spain’s struggling industry.

Several high-profile companies in Spain’s paper, steel, and automobile component sectors have announced production pauses in recent weeks.

It is partly because more than half of the cogeneration plants in Spain have closed since June due to the soaring cost of energy.

Spanish Minister for Ecological Transition Teresa Ribera explained that there are around 600 cogeneration plants in the country, accounting for around 20% of Spain’s natural gas consumption and supporting around 20% of the country’s industrial gross domestic product.

Unlike combined cycle gas turbine plants, these plants have not benefited from the “Iberian mechanism,” which places a price cap on natural gas.

Ribera said on Tuesday that the Iberian mechanism has saved Spanish consumers €2.3 billion ($€2.3 billion) since it was established in mid-June.

However, under the latest reform, cogeneration plants, which can produce 1.2% of Spain’s daily energy needs, will now be able to operate with the price caps.

At the same time, the Spanish government introduced a new service to compensate big industrial companies for quickly reducing their energy consumption in moments of peak demand.

Under the model, factories will be given 15 minutes of advanced notice to reduce their consumption when needed. If they do so within three hours, they will receive economic compensation.

While the Spanish government has promised that energy will not be cut this winter, leaders will meet with the main opposition party on Thursday to discuss energy contingency plans.