On 28 April, Spain and Portugal experienced an unprecedented event. At midday, a blackout struck, leaving the entire Iberian Peninsula without electricity. The first measures were taken to restore service, but it took several days for it to be fully restored throughout the country. Investigations are still underway to determine the causes and those responsible, although there is no denying that the operation of an electrical system is too complex to be able to unravel what actually happened, beyond the hypotheses that are circulating. On the other hand, for the average citizen who is not involved in the electricity sector, knowing how this system works can be complex and even unknown. In this first part, I will describe the current structure of the Spanish electricity system: generation, transmission and distribution; and in the second part, next week, I will present an analysis, taking into account the opinions of experts on the blackout and the conditions of the system, as well as an analysis of this structure in the context of the energy transition and as part of the European electricity system.
The Spanish electricity system
In general, an electrical system is made up of a set of facilities for
the generation, transmission and distribution of electricity from the
production centres to the final consumers: industry, companies, services and
homes. However, reality shows us that keeping an electrical system running is a
complex task.
I am going to make a descriptive analysis of the operation of an
electrical system, with reference to the Spanish system, with the aim of having
a clearer vision of the matter. Although the aim is not to delve into complex
technical or theoretical aspects, I hope that it will be possible to understand
the current structure of the sector.
Firstly, power generation. There are different ways of producing
electricity, through thermal power plants using oil derivatives, gas, coal,
nuclear energy; and through renewable sources, from hydraulic, wind, solar,
geothermal energy, among others.
In Spain, renewable energy is the main source of power generation. The
local grid operator, Red Eléctrica Española (REE), published that 149,000 GWh,
or 56% of the energy mix, will come from renewable sources in 2024. The country
targets 80% renewable generation by 2030.
Spain stands out for its solar photovoltaic and wind power generation. Hydropower also stands out in the renewable mix. Among the non-renewable sources, nuclear energy and combined cycle gas turbines stand out, followed by combined heat and power and diesel or fuel oil plants, the latter located in the Canary Islands and the Balearic Islands.
Then there are the coal-fired power stations, which are expected to be shut down this year. In addition to the nuclear plants, which are scheduled to be closed down in the next few years.
Technologies for generating electricity from hydrogen are being
developed. Spain is developing several green hydrogen power projects and hopes
to become a world leader by 2030. Green hydrogen is produced by electrolysis of
water using renewable energy. [3]
Secondly, transmission activities refer to the transport of electricity over long distances by means of high-voltage cables to the distribution network, where the voltage is reduced to bring the electricity to the centres of consumption. [4]
There are customers, large industries and companies, whose needs require
them to receive the high-voltage electricity flow (before reaching the
substations for voltage reduction to medium and low intensity). In these cases,
the distribution networks to their destination may be their own or they pay
special transmission tariffs.
In Spain, REE [1] is the operator responsible for transporting
electricity to the distribution network, which involves managing the flow of
electricity from the generation centres according to demand and maintaining the
smooth operation of the national grid
The Electricity Control Centre (Cecoel), located in Madrid, is the
operational brain that maintains the operation and supervision of the national
electricity grid in real time. The Renewable Energy Control Centre (Cecre),
created in 2006, is the centre responsible for the control and management of
electricity from renewable sources and its integration into the national
electrical system. [1]
Internationally, the Spanish electrical system is also connected to
Portugal, France and Morocco. Overhead lines with Portugal are located in the
north of the country; both countries form the Iberian Electricity Market
(Mibel). Connections with France are through overhead and underground lines in
the Basque Country, Aragón and Catalonia. The link with Morocco is by submarine
cable for emergencies such as the one on 28 April.
According to REE, there are projects to extend international connections
and local grids in the Balearic and Canary Islands.
Thirdly, distribution activities consist of transporting
electricity through medium-voltage (primary distribution) and/or low-voltage
(secondary distribution) networks to the centres of consumption. In addition to
ensuring the flow of electricity, the distribution companies are also
responsible for maintaining the physical network. [5]
In Spain, this activity is carried out by private companies, with more
than 90% of control of the market in the hands of five large companies:
E-Distribución, I-DE, Unión Fenosa Distribución, E-Redes Distribución and
Viesgo. There are also 300 small local public or mixed distributors.
Large electricity distribution companies in Spain [10]
- E-Distribución is the distributor of Endesa. Operations in Catalonia, Aragón, Andalucía, Balearic, Canary Islands and Badajoz.
- I-DE is the Iberdrola’s distributor. Operations in Basque Country, Navarra, La Rioja, Castilla y León, Madrid, Cáceres, Cuenca, Albacete, Valencian Community and Murcia.
- Unión Fenosa Distribución (UFD) is the distributor of Naturgy with operations in Galicia, Segovia, Soria, Castilla La Mancha and Madrid.
- E-Redes Distribución is the EDP’s distributor with operations in Asturias.
- Viesgo Distribución is an independant distributor that operates in Cantabria y parte de Asturias.
The distribution companies are assigned by locations and The National
Markets and Competition Commission (CNMC) is the governmental institution in
charge of regulating this sector. [6]
Fourthly, commercialisation consists of the direct sale of electricity to the end consumer. In Spain, this activity is carried out under competition in an open market. On the one hand, the marketers buy the electricity from the generating companies (wholesale market) and, on the other hand, they sell electricity to the end consumer (retail market). These transactions are carried out on the Iberian Energy Market Operator (Omie).[7] The market for electricity is the Iberian Energy Market Operator (Omie).
- Main electricity marketing companies in Spain: CHC Energía, EDP Energía, Endesa Energía, Ganaenergía, Gesternova, Holaluz, Iberdola Clientes, Lucero, Naturgy Iberia, Pepeenergy, Plenitude, Podo, Octopus, SOM Energía, Repsol.
In the wholesale market, traders daily buy electricity from generating companies, also known as the ‘electricity pool’, by means of hourly auctions, each hour the price changes, and the source of energy as well. Purchases are also made in monthly, quarterly or annual instalments. [8]
In hourly auctions, day-ahead hourly electricity is traded at the
marginal price, the highest price at which it was possible to cover the total
demand for the traded hour. At this marginal price, the volume bid must match
the volume demanded in order to reach market equilibrium. Power futures are
also traded.
Long-term contracts between generators and traders occur outside this
market, guaranteeing security of supply and price stability over long periods
of time.
In the retail market, retailers are responsible for selling
electricity to consumers: companies, businesses and households. The price paid
can be a regulated tariff at prices set by the government, a free tariff or a
tariff combined with other services (e.g. gas or solar panels, among others)
[9], which makes it possible to segment the market and adapt the service to the
needs of customers. Competition between market players is fierce, with even the
smallest differences in tariffs being used to retain and/or attract customers.
Unlike the distribution network, which has a fixed area of operation in
the national territory, customers can choose the supplier with whom they
contract their electricity service. The customer can also choose the type of
energy, as some suppliers only offer renewable energy.
In addition, retailers must pay a fee for the use of the distribution
network they use to transport the electricity purchased, which is included in
the bill paid by the final consumer.
With this general structure, the following
publication aims to put the current situation of the sector into context,
following the events of 28 April and taking into account current national and
regional policies on energy transition and the promotion of renewable energies.
Iris A. Mujica P.
Sources:
[1] https://www.ree.es/es/datos/generacion
[3] https://www.iberdrolaespana.com/conocenos/lineas-negocios/hidrogeno-verde
[4] https://www.fundacionendesa.org/es/educacion/endesa-educa/recursos/transporte-de-electricidad
[7] https://www.energiaysociedad.es/manual-de-la-energia/5-1-el-mercado-minorista-de-energia-electrica/
[9] https://www.repsol.es/particulares/asesoramiento-consumo/como-funciona-el-mercado-electrico-espanol/
[10] https://www.repsol.es/particulares/faqs/luz-y-gas/como-se-cual-es-mi-distribuidora-de-luz/
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