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31 Jan 2019

Reflections from Pöyry’s Energy Breakfast in Madrid

Last Friday Pöyry Management Consulting held its now traditional Energy Breakfast in Madrid, an event aimed at discussing Pöyry’s views on hot topics in the energy sector.

As on previous occasions, the audience of over 150 guests covered all sector stakeholders, including RES developers, power companies, banks, funds, gas and electricity network operators, energy associations, and other sector experts. 

Two presentations were made by Gareth Davies, Javier Revuelta, Richard Sarsfield-Hall, and Dorian de Kermadec.

Market design options for large scale RES penetration in Iberia

In the first presentation, Gareth and Javier considered various regulatory options which could enforce the ambitious new Spanish and Portuguese targets.  These targets seek to achieve 70% and 80% of RES penetration by 2030 in the Spanish and Portuguese power sectors respectively, all whilst keeping the lights on.  

Regulatory support mechanisms are required to incentivise huge RES developments in a context of high cannibalisation of market revenues. The Regulator and the market participants ought to analyse the volumes of RES capacity incentivised, the split between different RES technologies, and the detail of the support mechanism in order to understand the remaining risks. These risks could include abundant curtailments, high subsidies to be borne by end-users, and/or failing to reach the decarbonisation targets.

Despite the current apparent overcapacity in Iberia, keeping the lights on is also a concern given the announced closures of the nuclear and coal fleet, and the economic situation of CCGTs.  Not only will the regulatory framework need to prevent their closure, but the framework will also need to design a Capacity Remuneration Mechanism that attracts sufficient power at the right time for the required target system.  

Fully decarbonising Europe’s energy system by 2050 – the scale of the challenge

In the second presentation, Richard and Dorian considered the challenge to the European energy sector of meeting the 2050 decarbonisation target set by the Paris Climate Change Agreement.

They presented a ‘Zero Carbon Gas’ Pathway and an ‘All-Electric’ Pathway which would both meet the target, and, for each pathway, then suggested what was needed to decarbonise the energy system. They particularly considered the generation mix, heat and transport sectors, needed demand response, nuclear capacity, interconnections, existing gas networks and the availability of CCS. 

Some key takeaways were suggested by comparing the pathways: favouring competition between all zero carbon technologies will be critical to managing risks and costs; utilising zero carbon gas will make decarbonisation more efficient; and flexible demand with smart networks will be needed.

Other pathways can also be explored, with different technology or policy constraints, and Pöyry has the experience, tools and a team of experts capable of assessing the implications of all potential options.

Actions are required now to build efficient energy systems and Pöyry, with its unrivalled analysis and insight, enables the best decisions to be made.

To find out more about Pöyry's energy consulting, make sure you visit our new website.

Contact information

Javier Revuelta
Principal, Management Consulting, Spain
Gareth Davies
Director
Richard Sarsfield-Hall
Director, Pöyry Management Consulting
Dorian de Kermadec
Principal