(By Benito Arruñada, Professor at the Pompeu Fabra University, ‘Affiliated Professor’ of the BSE, FEDEA associate researcher and coordinator of the Mercado Libre Forum)
The Government of Galicia has launched a set of measures for the energy sector that is generating controversy both inside and outside the autonomous community. These initiatives include the creation of RDG Comercializadora Galega de Enerxía, an electricity marketer promoted by the Xunta with 30% public capital, and a Wind Plan that requires the renewal of more than 3,000 old wind turbines under strict conditions. In addition, energy companies must sell at least half of their local production to Galician SMEs at intervened prices, up to 50% below the market.
An unprecedented intervention model
The creation of RDG Comercializadora Galega de Enerxía is presented as a solution to lower electricity prices and benefit Galician citizens. However, this measure generates uncertainty on several fronts. If the marketer acquires electricity in the wholesale market, it will be subject to the same dynamics as any other, which will make it difficult to meet the objective of offering lower prices. On the other hand, if the Xunta forced private producers to sell part of their energy at reduced prices, it could be considered an expropriation and illegal measure, opening the door to litigation and both national and European sanctions.
Furthermore, the financial viability of this initiative is questionable. The sale of electricity below the market price will generate deficits that, sooner or later, will have to be compensated, either with additional taxes or with surcharges on the rates of other consumers. This could harm both Galician users and those from other regions.
The Wind Plan: a barrier to investment?
The Wind Plan aims to force companies to renew their facilities, replacing old wind turbines with more modern and powerful models. Although technological modernization is positive, imposing it under threat of license withdrawal generates legal uncertainty and increases costs for companies. This approach ignores fundamental principles of efficient regulation, which suggest that governments should set clear objectives and let operators, who have the know-how, decide how to achieve them.
Energy companies must sell at least half of their local production to Galician SMEs at intervened prices, up to 50% below the market
Furthermore, the imposition of intervened prices and the obligation to prioritize local sales break pre-existing contracts and negatively affect investor confidence. These measures could discourage future investments in Galicia, putting at risk its position as a leader in renewable energies in Spain.
Impact on the single market
The obligation to sell a significant proportion of the energy generated in Galicia to local companies at intervened prices not only introduces distortions in the market, but also raises serious doubts about its compatibility with European regulations.
These regulations seek to guarantee a competitive single market, in which all regions and economic actors compete on equal terms. For example, Asturian companies that rely on long-term contracts with Galician generators could be forced to pay higher rates, while their competitors in Galicia would get electricity at reduced prices. These types of measures fragment the Spanish electricity market and negatively affect its competitiveness. It would be expected that the injured companies would sue the Xunta in the courts of law.
A lost opportunity for Galicia
Galicia has great potential in renewable energies and should be a model of how to integrate these sources into the market in a sustainable way. However, extreme intervention policies not only threaten to compromise this leadership, but also create legal and economic tensions that could have long-term consequences.
The construction of more than a hundred wind farms, for about 2,300 megawatts (MW), is paralyzed in the courts. It does not seem that this Wind Plan is going to unblock that blockage, quite the opposite.
The Galician Government should reconsider its approach and opt for policies that favor investment, while respecting the principles of the single market and European regulations. Good intentions are not enough; A strategic vision and a stable regulatory framework are needed to guarantee the development of the energy sector.
#Galicia #light
