Overview

Spain is resource poor, having negligible gas and oil production and a small domestic coal industry that provides roughly a quarter of demand. The country has invested heavily in renewable energy to provide energy security and reduce import dependence and now has one of the highest penetrations of renewable energy in the G20. Gas-fired power plants are used to back up the intermittent renewable energy, making Spain the sixth-largest gas user in Europe. Gas is imported as LNG into six terminals around the country and receives most of its cargoes from Qatar, Nigeria and Trinidad and Tobago. Spain also imports gas through pipelines from Algeria.

The economic recession has altered the country’s energy policy dramatically – the government has cut subsidies to the renewable energy and coal industries to reduce budget deficits. This has already had an impact on the feasibility of new renewable energy projects, with many being abandoned as uneconomic.

The downward pressure on the price of coal, resulting from the shale gas boom in the United States, and low carbon price, has made the heavily subsidised domestic coal industry even less competitive. It has also made gas less competitive for electricity generation. In response to low gas demand the government has halted the construction of all gas infrastructure projects, including the El Musel LNG terminal, until demand picks up.

The northern regions of Spain are beginning to explore the country’s unconventional gas resource potential. Initial research has come back positive and these regions – particularly the Basque region – are encouraging the development of a shale industry. The revenue, jobs and energy independence the industry could provide are sorely needed. Until the industry can be set up, Spain will be heavily reliant on energy imports and the vagaries of the international market.

Profile first uploaded: 25/03/2013