Francisco Reynés, Chairman and CEO of Naturgy, today took part in the conference organised by the Naturgy Foundation and the Cercle d’Economia to address the situation facing the energy sector in the complex international climate we are experiencing, with a special focus on Europe and Spain.
Reynés referred to the three main challenges facing the energy sector: guaranteeing supply, energy affordability and decarbonisation. Thus, in relation to the energy transition process, he made it clear that it is advancing at great speed but the development of renewable electricity generation is coming up against “one of the major bottlenecks, which is the question of administrative permits”. This, in his view, is highly inconsistent with the policy objectives of decarbonisation. In that regard, Naturgy’s chairman highlighted the problem that the lack of investment in electricity grids poses for the expansion of renewable generation, given its fundamental role.
This permit bottleneck is also encountered by biomethane production projects, which are a great solution for solving the issue of organic waste and replacing fossil fuels. Thus, with regard to the decarbonisation process, he asked his audience not to think only of electrification as there are other technologies, such as renewable gases, which also contribute to the progress of the energy transition.
With regard to security of supply, he highlighted the commitment of some energy companies, such as Naturgy, with a substantial part of their balance sheet available to states and customers to guarantee supply.
In addition, he also wanted to remind everyone how Naturgy, with its price reduction initiatives, has taken decisions to ensure the supply of energy at reasonable prices. “This has to do with the commitment of companies, which is also demonstrated in their commercial policy,” he said.
Natàlia Mas, the Catalan Minister of Economy and Finance, referred in her speech to Catalonia’s role in the development of renewables. She pointed out that “renewables account for 10% of energy consumption and, in 2030, it has to be 34%”, so, in her opinion, “there is still a lot of work to be done”.
In opening of the conference, Rafael Villaseca, the Naturgy Foundation’s chairman, stressed that the sector is facing a number of issues that need to be resolved, such as interconnections with Europe, modification of the market and energy transition measures. Regarding the latter he asked: “What about transition measures in periods when we need to maintain support for fossil fuels or stop stigmatising them to ensure that we still have energy when the wind isn’t blowing?” In relation to the market situation and the relatively recent accusations of oligopoly, he highlighted the “awfulness” of these claims with the current situation of negative prices where you pay to sell and do not get paid.
The Director General of the Cercle d’Economia, Miquel Nadal, stated his belief that the physical integration of energy markets is the answer to the challenges facing the energy sector today, although “the European Union is not moving fast enough”. In addition, he pointed out the great weight that geostrategic factors currently play in the development of energy markets.
Other conference participants included Gonzalo Escribano, Director of the Energy and Climate Change Programme at the Elcano Royal Institute; Andris Piebalgs, a former commissioner for energy of the European Commission and a member of the Florence School of Regulation; Nemesio Fernández-Cuesta, commercial expert and economist, and former Secretary of State for Energy; and Oriol Guixá, Chairman of FEMCAT and Chairman of La Farga, who participated in a debate moderated by Núria Mas, Professor of Economics at IESE and a member of the Cercle d’Economia Board of Directors.
Gonzalo Escribano, who analysed the geopolitical situation of the energy sector, said that “the gas market has been reshaped by the conflict in the eastern Mediterranean and in Russia, which has stopped supplying Europe but is supplying Asia, which means additional transit problems in the main channels, such as the Suez Canal”. In that sense, he pointed out that “detours around the Cape of Good Hope imply cost readjustments and, in addition, increase the carbon footprint for the whole industry”.
On the future of hydrogen in Spain, he called for realism. “In my opinion, we should not have too high expectations. In hydrogen we are an island, not a hub. While the interconnections are being built, we will have 10 to 15 years to position ourselves in this market”.
Andris Piebalgs maintained “Europe needs to anticipate and think strategically. We need strategic autonomy. The war has not only affected energy, it has also affected the economic model”. Furthermore, he pointed out that “the European Union is going through changes in wholesale markets, including a decrease in gas consumption, a reduction in electricity demand and a higher frequency of negative electricity prices,” he said.
With regard to gas, the former energy commissioner pointed out that “the era of Russian piped gas is over and 2025 will mark the end of piped gas”. On demand, he pointed out that “industrial demand for gas seems to have reached the point of no recovery and this could be a problem for strategic independence. However, this drop in demand is not because of gas but because of the change in the industrial structure”. He pointed out that some studies indicate that part of the gas reduction may be due to an irreversible loss of industry in the EU.
The environmental impact, Piebalgs believes, is positive, given the reduction in emissions that is being recorded. “It’s good news that the stigma attached to nuclear generation has been removed. The package of climate legislation in the EU is extensive and has an impact on different types of industry,” he said. Looking ahead, “in the energy sector we have to be pragmatic. “There is no alternative to transition, so the path of transition needs to be adjusted in a realistic and forward-looking manner. The next European Commission will be able to do so but everything will depend on the election results.
For his part, Fernández-Cuesta, referring to the situation of the energy sector in Spain, stressed that “we produce electricity more cheaply than in the rest of Europe. This is a competitive advantage that has to be passed on to bills. The charges are political decisions and there are some €7 billion that should come out of the bill and go into budgets. Demand goes up when prices go down”. In the same vein, but with regard to generation, he insisted that “Spain has a competitive advantage in electricity generation, which represents a great opportunity for industry, but these low prices should be passed on to the bill”.
He also offered a pessimistic view on hydrogen in the short term: “it is not there and it will be a long wait, as it is difficult to develop green industrial production. It is therefore difficult to bet on hydrogen now, and betting on being an export hub is not the way of the world today”.
In his opinion, electrification should involve a major expansion of power lines but in Spain investment is limited to a percentage of GDP. “Lines are needed to electrify the economy. We have one of the most controlled systems in Europe for line creation and remuneration, which is why France has four times more planning. Electrification like this is impossible.
Oriol Guixá focused his speech on the business vision, referring to the global situation. “Competition between the USA and China has a major global impact. Following the shocks suffered by the industry during Covid, the US changed its model to a more local one but Europe is still dependent on China”. In his view, “Europe should consider how to protect European industry, which is facing problems of scale in its competition with China”.
Regarding the situation of companies, he said that “industry is globalised and is affected by events, wherever they occur”. In that sense, he pointed out that “this has meant a step backwards in globalisation. In Europe we have done things that in some cases have not been decisive”. It therefore points to the need for reasoning “like the US did, with protection for its industry: Europe should take a step towards protecting industry as a whole”.
In closing the conference, Jaume Guardiola, Chairman of the Cercle d’Economia, pointed out the importance for the Cercle “of being immersed in the debate in order to influence and take part in the public debate. Let the world of politics and economics listen to enlightened civil society”.
Naturgy Foundation
The Naturgy Foundation’s lines of action include transferring specialised knowledge on nine energy technologies and the keys of the transition towards a more sustainable energy system, as well as disseminating values to preserve the environment and responsible energy consumption.
Created in 1992 by the energy company, it also develops social action programmes, with special emphasis on actions aimed at alleviating energy vulnerability, as well as a training programme to promote the improvement of employability in the energy sector and contribute to the promotion of green employment.