Position Statement
Marqués de Villamagna 3, 11º
T: (+34) 917 373 200
28001 Madrid
www.circulodeempresarios.org
"Position Statement – Madrid, November 2023
El Círculo de Empresarios and the Energy Transition
The need to reduce the adverse effects of the global energy crisis, aggravated by the Russian invasion of Ukraine in February 2022 and an supply shock that triggered a notable inflationary process, has rekindled the debate on the reforms that need to be undertaken to have solid and resilient energy markets, and the measures to mitigate the negative effects of the crisis on consumers and companies. All this, while keeping in mind that in the medium and long term, the European Union, in the face of concerns about the impact of global warming and new geopolitical risks, urgently needs to accelerate the energy transition and the decarbonization process to achieve net zero greenhouse gas emissions (GHG) by 2050.
The energy transition is a catalyst for a new, more sustainable economic model, offering opportunities for value creation in industry, both in the supply and demand of energy, and will require an industrial policy that ensures competitiveness, growth, job creation, and the exploitation of the opportunities generated by this process. From Círculo de Empresarios, as a civil society institution pursuing the general interest of Spain, we believe that the design of an energy transition, being a commitment to future generations, requires a national strategy, consensual, credible, stable, and consistent over time.
The energy transition requires a gradual adaptation of all systems and structures to a new scheme of energy production, distribution, and consumption. Its objectives must be defined in a clear, concise, and prudent manner, favoring economic growth. It is based on a significant collective investment effort that requires financial and technological resources. The reforms carried out must send the appropriate signals and incentives to ensure that the effort is viable and yields results. Specifically, they must ensure a reasonable profitability framework for new investments, while avoiding the loss of competitiveness for companies and the risk of price increases for consumers.
At the same time, as in all processes involving social change, it is necessary to achieve social acceptance of the transition and the consensus of the administration, the business sector, and the public, with total transparency and rigor in the administrative approval processes and the information provided. It is also essential to minimize ideological biases and use simple and understandable language for society as a whole.
Círculo de Empresarios advocates for the continuous updating of a much-needed outlook for the Spanish electricity system in all its critical aspects of supply, security, cost, and industrial, economic, and employment impacts. This outlook should not be a merely technocratic exercise by public authorities but rather the result of collaboration with the economic sectors involved.
Under no circumstances should the analysis be partial. The approach must necessarily be holistic, considering all the impacts and costs, not strictly economic, for primary, secondary, businesses, and households. A correct vision of this transition includes all the costs of available technologies today and those still under development. Let us not forget that replacing existing energy solutions with alternative ones entails that the latter have learning curves that are not yet perfectly understood.
It is essential that the reform of the electricity market is built on common rules within a unified European framework. In particular, and even more so given the Spanish case, it is crucial to guarantee legal certainty and a regulatory framework without fluctuations, especially those of a retroactive nature.
In a context of technological neutrality, unilateral regulatory standards that favor some technologies over others must be avoided at all costs. It is essential to agree on the standards that all technologies must meet and, from there, let the free market determine which technologies are the most competitive, without forgetting that they will have to complement each other. A predominant market role involves the appropriate allocation of resources and the prevalence of technological alternatives with a more efficient cost-benefit balance.
Círculo de Empresarios has repeatedly denounced the costly bureaucratic obstacles to new projects and to the expansion or improvement of networks, without undermining environmental rigor. The transport and distribution networks are one of the key elements of the energy transition.
Energy taxation cannot be a source of legal uncertainty nor cause distortion of generation technologies. It should not make energy more expensive. If concentrated on production, it disincentivizes the substantial investments needed in generation, networks, and other infrastructures. For energy-intensive companies, a balanced competitive framework with companies from other competitor countries must be ensured.
Círculo de Empresarios firmly defends a support system for vulnerable consumers. This includes helping them modify their consumption habits and reducing the impact of the energy bill on their budgets.
It is essential to support R&D efforts in the energy sector, especially in fields where the Spanish industry can have a strong positioning in the medium and long term, without excluding any emerging technology, and highlighting the opportunities offered by hydrogen and renewable fuels (advanced and synthetic biofuels).
To carry out the transition, it is necessary to electrify the economy and decarbonize electricity generation and supply. Liquid renewable fuels, renewable gases (liquefied or gaseous), hydrogen, biomass, and CO2 capture, use, and storage also play a significant role, depending on the capacity of each of these technologies to contribute to improving the competitiveness of our economy. It is important to consider that in a decarbonization process with a high share of renewable energy, problems with the stability of the electricity system arise, as well as difficulties in covering peak demand due to the intermittency of generation from these energy sources.
For the system to function properly, firm and flexible energy availability is required, which implies a large capacity for storage, of diverse types, with the proper power controls. Ideological positions should not distract from the need to extend the life of existing generation assets that guarantee system stability. Regulation should favor the necessary investments in this type of generation.
On the Reform of the Electricity Market
Círculo de Empresarios supports the following measures:
- Developing forward markets and bilateral contracting, which help reduce volatility and provide price stability for consumers.
- Minimizing market intervention, allowing it only when absolutely necessary during short periods in times of crisis. This prevents price, supply, or demand distortions and ensures legal certainty for market participants.
- Creating a capacity market to guarantee power reserves during peak demand periods or generation shortages, particularly given geopolitical risks.
- Ensuring that the market provides investors with clear signals regarding power needs, both in terms of time and location, as well as the value of energy at any given moment - especially for technologies that ensure system stability and security.
- Facilitating the integration of operational services markets, along with wholesale and retail markets.
- Guaranteeing optimal price formation, balancing supply and demand over short, medium, and long terms. Investors must have a reasonable expectation of recovering the full costs of all generation assets and recognizing profitability differences among technologies to avoid treating distinct realities as if they were the same.
Energy is an essential commodity that society must access under optimal conditions. It requires substantial long-term investments, primarily carried out by the private sector, which must compete in terms of timing and profitability with other private investments. Moreover, investment efficiency in the energy sector is crucial to ensuring that final energy costs do not hinder consumer competitiveness.
For this reason, it is essential that the energy market operates within a transparent and competitive framework, enabling efficient resource allocation. This requires a well-regulated market with legal stability and certainty, aligned with the long-term investment cycles of its participants. All long-term activities essential to society—especially those related to energy generation, transportation, distribution, and consumption—demand high-quality governance, institutional cooperation, transparency, stakeholder dialogue, regulatory quality, and stability. Technical criteria and the general interest must take precedence over ideology or short-term political interests. This principle of good governance should also extend to policies that help consumers adapt to the energy transition goals.
At the Círculo de Empresarios, we believe it is essential to approach the energy transition with rigor, leveraging it as an opportunity to transform our economic model into one that is more competitive, sustainable, and capable of driving growth and employment.
Madrid, November 3, 2023
