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Spain's electricity market design: A case study
KTH, School of Industrial Engineering and Management (ITM), Energy Technology, Applied Thermodynamics and Refrigeration.
KTH, School of Industrial Engineering and Management (ITM), Industrial Economics and Management (Dept.).
2012 (English)Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesis
Abstract [en]

Spain’s rapid implementation of renewable energy has been described as a success but thegovernmental cost associated to this rapid implementation has grown significantly. The purposeof this report is to investigate Spain’s electricity market, its current situation and present it, usingthe Swedish system as a reference.The report commences with a presentation of the Spanish and the Swedish electricity markets,followed by a chapter where they are compared. The renewable electricity production and theassociated development during the last decade is one focus of the comparison. The other focus ishow the costs of the subsidy systems have evolved and how they are connected to the differentenergy sources. Two sources, wind and solar, receives a higher interest than the others.Wind power shows a strong development in electricity production and contributes to asignificant part of the Spanish electricity mix. The costs of subsidies connected to the windpower reflect the produced electricity. Wind power in Sweden has had a rapid development overthe last two years and the subsidies costs are aligned with the electricity production through theuse of a quota system.There are great differences between the two countries regarding solar power. Sweden has hardlyany, while Spain has a noticeable contribution of electricity from solar power to its electricitymix. Solar power has an even more noticeable share in the Spanish subsidy system. The highsubsidies to solar power, which have not followed the reduced investment costs of equipment inrecent years, have led to a high degree of participation which has led to soaring costs for thesystem. Spain’s subsidy system is based on fixed earnings and variable costs and in combinationwith higher than expected costs, an annual deficit between the earnings and cost has been createdfor the government. This yearly deficit has increased and the Spanish government is now in debtto the five largest energy suppliers. The Swedish subsidy system carries its own costs and theSwedish government does not have a financial risk associated with the system.This study shows that the Spanish subsidy system has been too generous towards solar powerwhich is a large part, but not the only one, to the country’s huge deficit and debt. Sweden, withits quota system constructed without fixed earnings, does not risk creating a debt similar toSpain’s. Spain’s large part of wind power and how the volatile power is regulated could be ofinterest for Sweden which aims to increase its share of wind power in the future. This study findthe answer to how Spain copes with its high share of intermittent power production in that itaccepts a lower efficiency in its gas turbines in order to regulate the power output. Sweden, acountry without a large share of gas in its electricity mix, but with a large share of hydro power,uses its hydro capacity to regulate volatility in electricity system. Prior studies have already beenmade in this area with the result that 30 TWh of electricity from wind power, more thanSweden’s goal for 2020 regarding wind power, would be possible to regulate with the presentsystem each year.

Place, publisher, year, edition, pages
2012. , 62 p.
Examensarbete INDEK, 2012:31
Keyword [en]
Electricity market design, renewable energy support scheme, feed-in tariff, quota system
National Category
Energy Engineering
URN: urn:nbn:se:kth:diva-98488OAI: diva2:537379
Educational program
Master of Science - Sustainable Energy Engineering
Available from: 2012-06-29 Created: 2012-06-26 Last updated: 2012-06-29Bibliographically approved

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Applied Thermodynamics and RefrigerationIndustrial Economics and Management (Dept.)
Energy Engineering

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