Neither wind nor demand, just competition

Do not pass any day without news regarding an increase in the power system economic deficit “Tariff deficit”. No day also without rising bills from the power utilities. In July, the Royal Decree-Law 9/2013 to ensure the system financial strength attributed it to levels of rainfall and wind above the average and contraction in demand. December last weeks, allegedly little rain, little wind and higher demand. It is said that anything can be deduced from a contradiction. As well, I gather that it is not the wind or the demand, but competition or, to be precise, its absence in the market, that has caused these shocks.

The possibility of pass costs entirely to customers, without worry about their opinion, only occurs in essential services without competition. The liberalization of the electricity sector in 1997 in Spain, aimed at promoting a European internal market for electricity. At the same time, to allocate resources effectively to get high quality service at affordable prices.
The little grid interconnection with France prevents the first thing, for now. Second, requires effective competition that is the regime of free enterprise in the framework of the market economy that public authorities ensure and protect (article 38 of Spanish Constitution). The economic regulation law gives us some ideas to achieve this. So for example:

First, introduce transparency in the formation of prices of generation, changing the model of auctions CESUR. It makes no sense to pay the same price MWh, more expensive, deserved to combined cycle (thermal gas), whose investments are recent, to those MWh generated with hydro and nuclear whose investments were cancelled years ago.

Second, give security to the regulatory framework of the solar energy that neither pollutes nor requires imports of primary energy, while it continues its path to become cheaper, would multiply producers and reduce distribution costs to bring closely demand and production.

Third, audit costs of transport and distribution better, as well as other regulated costs, and to set their remuneration by the Markets and Anti-Trust Agency, rather than the Government.

Fourth, Force the utilities vertical separation to the point, if it were necessary, that there are no generators and marketers of the same business group.

Perhaps then, with or without wind, we will forget once the increase in power tariff deficit.

Enric R.Bartlett Castellà
Associate Professor of Public Law
ESADE Law School (Ramon Llull University)

This article was published, in Catalan and Spanish, on Tuesday January 14 2014 in La Vanguardia p.20.

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