The Role of the Iberian Peninsula in the New EU Energy Strategy
Article Co-Written by Maria Beatriz Cerqueira and Jokin de Carlos Sola
Russia may have only invaded Ukraine, but by doing Russia has attacked the rest of Europe, on various fronts. Crucial among these is the energy sector. Read along as we explore how this invasion has affected Europe’s energy sector, the key players to consider, and what the possible solutions are.
Over the last couple of decades, several EU members have built an immense dependence on Russian fossil fuels. As a result of this, European leaders have been forced to realise they must have other short term alternatives and invest even more in the green transition for the long term.
PORTUGAL AND THE LNG
One of these key players in Europe’s energy supply system is Portugal. Currently, all of the natural gas that is consumed in the country is provided by foreign countries. The gas is imported both by sea (liquified natural gas or LNG) to the port of Sines and inland through gas pipelines coming from Spain. Some of the country’s biggest LNG suppliers are Nigeria and the USA, so Portugal is in a better position than most to become a strategic gateway for the LNG supply chain between Africa to the US and Europe.
Given the current ‘energetic’ situation, Portuguese PM Antonio Costa said that the deep-water port of Sines — “has the infrastructure to host and export natural gas to Europe.”
Despite the opportunity of becoming one of Europe’s natural gas suppliers, the goal is still to turn gas into a transition and backup energy source for electricity production, given the growing role of renewable energy sources in the country. Renewable production has supplied only 37% of energy consumption, while non-renewable production supplied 30% and the remaining 33% was supplied by imported energy.
Portugal’s natural gas consumption hit its second-highest ever in 2018, a year that saw a national all-time high due to extreme drought, which forced the extensive use of gas-fired power plants to replace hydro production. The same is expected in 2022 since the country is currently experiencing a similar situation.
Currently, the EU is signing new deals for LNG supply from the US, Qatar and other partners. With the seven regasification refineries located in the Iberian peninsula, out of the 22 located in the EU.
CONNECTION IBERIA-FRANCE
As has been explained, over a third of the LNG in the EU is in the Iberian Peninsula, where it can be easily received, stored and refined. Aside from this, it should be noted that Spain receives most of its gas from another source: Algeria. This has granted gas to Spain independently from any conflicts in Eastern Europe and could become an alternative for the EU if the pipelines that connect both countries, could be extended further North. However, this could also create problems in the future. Spain imports the Algerian gas from two pipelines: the Magaz which goes from the Algerian port of Beni Saf to Almeria, and the Euro-Maghreb which goes through Morocco. Due to existing tensions between Algeria and its neighbour Morocco, the latter pipeline suffers the risk of being blocked by one of or both countries, risking the transport of the gas.
In addition to this, there is the problem that Russian diplomacy may pose, considering Russia’s long-standing relationship with Algeria.
However, it is unlikely that Algeria would risk the revenue loss, even if that risks its relationship with Moscow.
Now one of the main issues when it comes to the role of the Iberian Peninsula (especially Spain) as a supplier of gas to the rest of Europe; is its connections, or more accurately, the lack thereof with France. There are various reasons for this, such as geographical, economic, and political.
Both Spain and France are separated by the mountain range of the Pyrenees, which makes it very difficult to transport or build in other areas that are not the two corners of the mountains. Currently, there are two pipelines going across the border. Both are on the Atlantic side of the Pyrenees, through the Basque towns of Larrau and Irun. However, there have been plans for the construction of a pipeline that would go through Catalonia on the other side of the mountains, doubling the amount of gas Spain can send to the rest of the continent. This is why for years the three countries: France, Portugal and Spain, developed the Midcat pipeline. However, the project was dropped due to disagreements between the countries about the funding of the project.
Further adding to this were the different energy policies enacted by each country, meaning there was a lack of interest in paying for a project focused on gas. Both France and Spain have traditionally preferred to focus their resources on other areas, most notably nuclear energy in the case of France.
Regardless, the situation has dramatically changed. With the gas prices rapidly rising and the conflict with Russia having signs of further escalation, there are many calling for the Midcat project to be completed and put into action. This is very important not only because of the gas from Algeria, but because the EU is looking for new gas suppliers such as the US, Saudi Arabia or Qatar and in all of those cases, the gas will need to be transported in a liquified form and therefore will probably have to regasified in the Iberian Peninsula. This means that both Spain and Portugal could become the door for a lot of the gas coming to Europe and that new pipelines will be needed since the ones in the Basque area are already at full capacity.
There are however yet again some discrepancies regarding the payment of the project and some environmentalists have argued that the funding should be used instead for the creation of batteries that could transport renewable electricity. Incidentally, it seems that the EU is more interested in short term solutions, and the pipelines that better connect the Iberian Peninsula could be a solution. German Ambassador to Spain, Wolfgang Dold, has already demonstrated that Germany supports the finalisation of the Midcat project.
RENEWABLES
In the Iberian Peninsula alone, there are multiple renewable energy sources available; wind, solar and hydropower. Which could easily be useful ground for the European Green Deal ambitions.
For instance, Spain is already planning to heavily increase its production of renewable energy in the coming years. This boom of renewable energy in Spain will certainly render the country a force to be reckoned with. The overall production has gone from 41GW to a projected 145GW; 21GW in wind power and 73GW in solar power. The reason for this is the increasing number of projects that are being developed in Spain. This has a lot to do with Spain’s climate, with regions in the South planning to produce almost seven times more solar energy in the coming years. All the while Northern regions are increasing their output in wind power, taking advantage of the heavy winds of the Northern coasts and mountains.
NEW STATUS FOR THE IBERIAN COUNTRIES IN EU ENERGY POLICY
By the end of March 2022, both Portugal and Spain were pushing for common EU energy regulations that would (among other things) decouple the gas from the electricity prices. Other EU countries like Germany and the Netherlands opposed this. It became clear that the Iberian countries, with their increasing use of renewable energy, and lack of interconnections with the rest of the EU were going to have a hard time supplying themselves with natural gas. Especially considering the increase in prices following the EU policy to decrease its dependence on Russia. It is because of this that a new accord was achieved.
Now, both Portugal and Spain will become “energy price islands” in contrast with the rest of the EU and will be allowed to regulate the price of energy in the hope of finding a more permanent solution by the next meeting in May 2022.
CONCLUSION
The EU has been pushing for new and renewable sources of energy.
But the recent crisis has also shown the necessity of strategic energy autonomy for Europe to be increasingly more important. One of the biggest consequences of the Ukrainian conflict is the realisation that the EU cannot depend on Russia for its gas supply, with Moscow’s foreign policy seemingly designed for an eventual confrontation with Brussels. That is why the role of the Iberian Peninsula is crucial in the long term plans for alternative gas supplies. The different capitals need to not only coordinate the purchase and transport of gas but also to increase the connections between the Peninsula with the rest of the Continent. Apart from this, the role of politics in the Maghreb will also soon become a matter of European security. A conflict between Morocco and Algeria is possible, perhaps following a rapprochement of Moscow to Algiers. As this could certainly threaten the flow of gas from Algiers to Spain.
The new energy situation allows the control of prices in the Iberian peninsula but at the same time, it makes the connections between both the countries and the EU more difficult. However, it is likely there will be an increased effort in both communication and cooperation between the two countries because of this.
It will also be interesting for the EU to see how the renewable sector further develops in the Iberian Peninsula, and how the sustainable energy flow could help to achieve the goals of the EU Green Deal.
