Spain power markets long-term outlook H1 2015 Report

Commodity Market Report 31 August 2015

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Report summary

Economic recovery is bringing growth back to Spanish power demand, although Spain's power market remains in a period of substantial oversupply and regulatory uncertain. Government measures to keep the tariff deficit under control are beginning to show results. 2014 is the first year when a tariff surplus of €11 billion is reported, compared to a deficit of € 26 billion in 2013.

Executive summary
- Demand recovers but the market continues with excess capacity
- Tariff deficit continues to restrain growth in renewables
- Despite indigenous supply receiving state support, coal's long term prospects remain poor
Demand
- Residential demand
- Industrial demand
- Commercial / other demand
- Losses and energy industries
Supply
- Existing capacity
- Capacity developments and forecast
- Gas
- Renewables
  - Special regime (SR)
  - Restructuring of renewable energy support - taxes and specific remuneration
  - Specific Remuneration Scheme
  - Tariff deficit declines as regulatory changes pay-off
  - Challenges for the growth in renewables
- Nuclear
- Coal
Supply-demand balances
- Annual generation by source
Infrastructure
Trade
Prices
- Annual whole power prices and spreads
  - Lower hydro output raises short term prices
  - Lower demand and imports offer limited upside for spreads