The chairpersons of the regulatory bodies in Spain and Europe highlight the importance of the integration of the European market for successful completion of the energy transition

The chairwoman of the National Commission for Markets and Competition (CNMC), Cani Fernández, and the director of the EU Agency for the Cooperation of Energy Regulators (ACER), Christian Zinglersen, today participated in the 13th edition of the Energy Prospectives conference series and discussed the perspectives of energy regulation in Spain and the EU.

To open the conference, organised by Naturgy Foundation and the IESE Business School, the chairman of Naturgy, Francisco Reynés, emphasised “the importance of the transition as a whole and the need to make adequate regulations in this process”. “The world of energy requires smart regulation and there is no doubt that this must be regulated in order to make progress with the energy transition. However, we must be realistic in allowing this transition to be completed in compliance with the three energy goals: sustainability, guaranteed supply and affordable prices for consumers”, stated Reynés.

Along these lines, the chairwoman of the CNMC agreed on the challenge posed by the energy transition and emphasised the third energy goal mentioned by the chairman of Naturgy, affirming that the consumer must be the one who motivates our actions the most, without losing sight of security of supply, which must continue to be “a priority”.

Fernández emphasised the role of the market, which “must continue to lead the energy sector”. “We have experienced difficult times where temporary measures have been needed, but it has been the market that has managed to consolidate energy as we see it now,” he said.

Concerning the objectives set in terms of renewable energy, the chairwoman of the CNMC insisted that Spain boasts a very privileged position, which must be complemented by a gas system with the capacity to guarantee supply, but referring to how to integrate them into the energy mix. “The regulation must address specific challenges to ensure this integration, such as modernising infrastructures through digitisation to ensure that intermittency can be guaranteed, all in an affordable way for the consumer,” Fernández said.

Legal certainty to guarantee investments

She also asserted that “regulation is crucial, because it must create a framework that provides legal certainty, but be flexible enough for adaptation to be possible in disruptive situations”, adding that legal certainty must prevail to allow for investments in the energy transition. In this sense, she defended the independence of sectoral regulatory bodies to “ensure that the markets are strong and are fully competitive”.

Fernández also highlighted the European collaboration seen within ACER, as “this is the guarantee that the markets function as an instrument for generating the necessary investments for decarbonisation. The markets must operate, if necessary with contingency measures, but without forgetting the structural measures”.

In turn, the director of ACER highlighted the importance of the role of the organisation he represents when dealing with the integration of energy markets, referring to this as “the key challenge we face in Europe”.  In this sense, Zinglersen recalled that, against the backdrop of the price volatility that we have been seeing, “this would have been seven times greater if the markets had been isolated.”

In the words of the director of the European agency, “the commercial availability of cross-border electricity capacity is of critical importance for many Member States, which includes the Member States that are the main exporters of electricity over the course of the year.”

He went on to state that “continuing to strengthen a model of shared resources across the EU requires investment in infrastructure, regulations, institutions and governance, and, what is most important, it also requires political investment in the comfort levels of being more interdependent with other Member States, to meet their own energy needs.

In terms of interconnections, Fernández recalled their importance in the recent episode that involved a reduction in nuclear generation in France and the role that Spain played in securing the supply of our neighbouring country, demanding that interconnections be made.

As part of his analysis of the current situation, Zinglersen stated that “the improvement in the balance between supply and demand has pushed energy prices even lower in recent months.” However, supply is generally limited, which makes prices quite volatile and exposed to unforeseen circumstances.” To this end, he stated that “Asian demand for LNG, which is recovering, continues to be an important factor for gas prices”, and that “the risk of price volatility persists, because the market remains exposed to unforeseen circumstances”.

To this end, Zinglersen asserted that “volatility is here to stay”, and referred to the tools available to address it: preserving price signals to encourage flexibility, greater integration of EU markets, improved futures markets, consumer protection and a role for long-term contracting.

The two speakers also addressed the need to establish adequate regulation for the capacity mechanisms that guarantee supply. In relation to renewable gases, the chairwoman of the CNMC said that steps are being taken to incorporate them prudently enough into the system, given the potential of biomethane in Spain. And in relation to hydrogen projects, she indicated that they go hand in hand and can be developed when there is enough renewable energy for consumption.

To round off the session, IESE Business School professor, Jordi Gual, stated that it is crucial for the correct measures to be adopted so that the transition can be made with supply security and at affordable prices. “It is important, as politicians, regulators and industry agents, that we get the regulatory measures right, because there is a lot at stake in this transition towards sustainable energy and, unless we get it right, the public will not understand what it is about, potentially heightening the feeling that public policy decisions are far removed from their day-to-day activities and end up harming them”.