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In January 2010 as part of efforts to bring the Spanish economy out of the doldrums, the government drafted the “Sustainable Economy Law”, designed to invest in renewable energy and high-tech industries to create jobs and stimulate economic growth.

Spain has some of the largest renewable energy companies in the world but has suffered one of the worst economic recessions of any developed country in 2008-2009 due to a housing and construction bust.

  • The renewable energy sector contributed, both directly and indirectly, €7.3 billion (US$10.4 billion) to Spanish GDP in 2008 or 0.67% of GDP, according to the Association of Renewable Energy Producers (APPA). Significant growth potential remains;
  • Wind energy production accounted for 52.0% of renewable energy’s contribution to Spanish GDP in 2008 according to APPA;
  • Renewable sources made up 20.8% of Spain’s electricity supply in 2009. Fossil fuels are still the dominant source of electricity production in Spain.
Electricity generation in Spain by type: 2004-2009
GWh (000)
Source: Euromonitor International from OECD/trade sources/national statistics. Note: Renewable electricity sources includes all other sources of energy not classified as Nuclear or Fossil Fuels.
 

Implications

  • Spain’s “Sustainable Economy Law” will encourage employment and training in high value added industries, such as the renewable energy sector. Special support for renewable energy companies through financing assistance was already in place as of 2005 and helped make Spain’s renewable energy sector one of the best in the world;
  • With many governments around the world focusing on “green jobs” as part of stimulus packages, companies involved in renewable energy stand to benefit from the push;
  • Investment in renewable energy fell during 2009, when world oil prices dropped to around US$40 per barrel in December 2009 amid the world economic downturn from a high of around US$140 per barrel in the summer of 2008. Prices have recovered and were holding close to US$80 per barrel in early March 2010;
  • The increase in electricity generation from renewable sources has allowed Spain to begin phasing out its nuclear power plants. Of the eight remaining nuclear reactors in operation, one is scheduled to close in 2013. Spain produced 17.6% of its electricity using nuclear technology in 2009;
  • However, the costs of renewable energy production are more heavily front-loaded than fossil fuels as building renewable capacity requires higher investment in generating equipment, which may lead to higher initial energy costs for business and consumers;
  • Despite being among the biggest renewable energy producers in the EU, Spain had the greatest carbon intensity (CO2 emissions per unit of output) of the big Western European economies in 2009 at 266.2 grams per US$ but lower than the OECD average of 323.1 grams per US$. Renewable energy will help reduce the country’s carbon emissions.

Prospects

Despite disappointment surrounding the Copenhagen Climate Summit of December 2009 when world leaders failed to come to agreement on greenhouse gas emission reductions, pressure will grow on governments to take action on climate change:

  • Spain is on track to exceed its EU renewable energy target of 20% of energy supply by 2020. The EU has stated a 30% renewable energy target for 2030;
Comparison of renewable electricity production in selected EU countries: 2009
% of total electricity production

Source: Euromonitor International from OECD.

  • Economic recovery throughout 2010 and 2011 will drive up the cost of world oil prices and make renewable energy more attractive for governments and companies;
  • The economic outlook in Spain remains poor because of extremely high unemployment and uncertainties surrounding the housing market. Real GDP growth is expected to be -0.6% in 2010 and 0.9% in 2011. The renewable energy sector combined with employment and training incentives in the Sustainable Energy Law will help give workers new and better skills and bring in much needed foreign investment.

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