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Spain's natural gas-for-power tax cut takes Eur5/MWh off CCGT output cost: analysts

   date:2018-10-11     Author:S&P Global Platts    Browse:0    
Core tips:Barcelona — The elimination of Spain's so-called "green cent" tax on natural gas used in power generation is set to red
Barcelona — The elimination of Spain's so-called "green cent" tax on natural gas used in power generation is set to reduce gas plant output costs by around Eur5/MWh ($5.74/MWh), sector analysts said Monday.

Removal of the tax, currently levied at Eur2.34/MWh (Eur0.65/gigajoule) of gas consumed, will effectively decrease the output electricity cost of 50%-efficient combined-cycle gas turbines by Eur5/MWh, JP Morgan Cazenove utility analyst Javier Garrido told S&P Global Platts Monday.
The action could knock Eur2/MWh off the baseload electricity price in Spain, since gas-fired power stations set wholesale electricity prices for around 30-35% of the year, Garrido said in a note.

The cut is to be open-ended, according to the official Decree Law published Saturday in Spain's BOE state gazette.

On Friday, minister for ecological transition Teresa Ribera had said the green cent tax would be suspended for six months, aligning it with a temporary suspension of a 7% tax on generation. The official BOE text, however, makes clear that suspension of the green cent on gas is indefinite.

Royal Decree Law 15/2018 (Urgent Measures for Energy Transition and Consumer Protection) further clarifies that removal of the green cent tax applies just to gas used in CCGTs and combined heat and power plants.

This leaves in place existing green cent taxes on coal and fuel oil used in power generation.

Besides the green cent legislation, Saturday's BOE also confirmed the suspension for six months of the 7% tax applied in 2013 to all generating sources, with effect from Sunday, October 7.

JP Morgan's Garrido said suspension of the 7% tax (until April 1, 2019) should result in a Eur4/MWh-Eur4.50/MWh drop in wholesale prices for both Q4 2018 and Q1 2019.

Ribera said Friday that both measures were of a temporary nature and had been pushed through in order to address bullish power prices (which are on course for their second-highest annual average this century) and to give the government breathing space as it draws up a plan to align energy market design with European targets for 2030.

The Decree Law is still subject to parliamentary approval within a month, meaning there is a possibility that the measures could be rejected -- although the main opposition party has declared itself in favor, at least, of dropping the 7% levy.

Among other measures confirmed in the BOE are the elimination of grid fees for prosumers, and legislation to cover installation of renewable energy equipment for groups of clients, such as apartment blocks.

The ministry has also acted to unclog a potential bottleneck in large-scale development by extending the timeframe for renewable projects to submit paperwork, amid fears that a large portion of the 9 GW awarded at auction last year might miss deadlines and not be installed in time to meet the European 2020 target.

In the longer term, Spain is working on an ecological transition law that it hopes to approve by the end of this year.

This is expected to address issues such as market reform, legislation for storage projects, which is one of the priorities on this government's agenda, and a strategy for the eventual closure of thermal and nuclear power plants.
 
label: Chemical News
 
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