Renewable Energy Set to Replace Coal in Spain

Spain has recently made headlines with good climate news. In May, the government announced plans for full decarbonisation. At the beginning of July, half of the country’s coal plants were retired. REN21 analyst Duncan Gibb explains why this is the moment for governments to understand that spending taxpayer money to keep fossil fuel infrastructure afloat is a sunk investment.

Under a recent draft law, the Spanish government commits to make Spain’s electricity system 100% renewable by the middle of the century, ban all new coal, oil and gas extraction projects with immediate effect, end direct fossil fuel subsidies and make all new vehicles emission-free by 2040, reported Climate Home News in May 2020. The move was widely hailed as pioneering.

Only a month later, the sky above the chimneys of Spain’s coal-fired plants remains clear. Seven out of fifteen coal-fired power plants ceased production at the beginning of July. Four further plants are getting ready to retire soon, reports national newspaper El País.

Coal Phase-outs Happen Faster than Governments are Planning

While coinciding, the two events have little to do with each other, explains Gibb. “The Spanish government has not taken any action to force a phase-out. It’s a response to market forces and European policies. The Emissions Trading Scheme makes fossil fuels more expensive and it has simply become uneconomic to run these dirty plants.” Coal-fired electricity production in Spain has been hitting one record low after the other for more than a year. Lower demand and falling gas prices as a result of COVID-19 exacerbated the pressure.

Graph showing investment in New Power Capacity in 2019. Renewables (excluding hydropower) made up 71.2% of total investment.
Investments in renewable new power capacity outpaced that of new fossil fuel capacity again in 2019.

Fossil fuel operators in Spain are not the only ones affected. Similar developments can be seen in many places, such as in the UK and the US. Both Florida Power & Light and the Colorado Springs Utilities Board have recently announced plant closures. “Although the Trump administration does everything it can to promote coal, it’s not economically viable anymore. It seems that coal is on the way out much faster than anybody was planning,” says Gibb.

Fast-growing Renewables Take Over from Coal

Gas-fired electricity production is often seen as a director competitor and natural successor to coal-fired electricity, as prices have fallen dramatically over the past months. According to Gibb, this is neither realistic nor advisable. “Gas is just another polluting fuel linked to an old-school concept of centralised production. We should call it fossil gas to avoid any misunderstanding. Also, it comes with dependency on imports. Sooner or later, it will face the same societal opposition as coal.”

Based on facts and figures gathered for the Renewables 2020 Global Status Report, he is convinced that the outgoing capacity will be replaced by renewable electricity. “Just to give you the order of magnitude: The seven newly-retired coal plants had a total capacity of 4.6 GW. This compares to 4.8 GW of solar photovoltaics (PV) which were brought online in Spain in the last year alone, doubling its installed capacity. And the Spanish PV market keeps growing. Wind power is also a big deal in Spain, which ranked fifth in the world in 2019, both in yearly installations and in total capacity. And don’t forget concentrated solar power (CSP). With 2.3 GW already in place, Spain is the world leader and has a target for installing additional 5 GW by 2030.”

Renewables are the Bigger Job Machine

 El País notes that 2,400 people will be laid off following the shutdown of 11 coal-fired power plants. Yet, Gibb is confident that these issues can be managed. “We don’t just say, oh, they work in coal, too bad if they lose their jobs.  The transition to renewable energy should be bottom-up. We have to approach communities and citizens not as obstacles, but as partners. We need retraining and reskilling programmes. But there is a lot of evidence that renewables enjoy greater public support and are ultimately the bigger job machine.

Graph showing jobs created per million dollars of capital investment in power generation technologies
Source: International Energy Agency (IEA) (2020) World Energy Outlook Special Report: Sustainable Recovery

Political Inertia at the Expense of Taxpayers

Yet, the fossil fuel industry refuses to leave the field without a fight. Gibb sees strong forces that are pushing back, especially in countries which have their own coal resources or fast-growing populations. “Many Asian and African countries still see coal as a resource to mine and as a tool to cover surging electricity demand. Coal exporting countries like Australia are investing a lot to keep the industry afloat and continue exporting.”

But even in Europe new coal-fired plants are still coming online, such as the Datteln 4 plant in Germany. “This is a disaster,” says Gibb. “At the same time, the German government is about to give more than €4 billion to two energy companies to phase-out their coal-fired power plants by 2038. My personal belief is that they will be phased out much sooner, both because it’s not economic to run them and because of public pressure which can be really powerful as we have seen with Germany’s nuclear phase-out. That being said, twelve other European countries have already announced coal phase-outs by 2030 or earlier.”

For Gibb, it is clear that the only barriers still facing renewable electricity are shortsighted and unclear policy measures and powerful fossil fuel industry lobbies. “In the end, renewables will win. But we need this to happen faster. Trying to make industry happy and delaying the inevitable just makes the inevitable more expensive.”

Read the Renewables 2020 Global Status Report, REN21’s annual report on renewables policies, markets and technologies, here