The Mediterranean Diet for the Energy Industry: What Spain, Portugal and Greece can teach us about energy transition

9 July 2020

The “Great Lockdown Crisis” has had a big impact on the global economy in 2020. With economic activity slowing down or even halting temporarily, power demand has been down globally from 10-20%. We are also witnessing higher share of renewables, more power price volatility and reduced emissions, as traditional baseload plants have made way for renewable energy.

As economies are opening up, one would expect the situation to gradually get back to normal. However, at least in Europe, that hasn’t been the case. In fact, our Energy Transition Lab shows that we are witnessing an accelerated energy transition in the European power markets.

Coal generation is experiencing a rapid decline in Europe in 2020

Our Energy Transition Lab shows that one of the most remarkable outcomes in the European power markets has been the severe negative impact on coal generation. In 2020 (YTD), coal generation has declined 37% (67.6 TWh) compared to the same period in the previous year. The share of coal in total energy generation in Europe has declined from 15% last year to 12% this year. When looking at the country-level, we can really see the magnitude of change.

Most European countries have had lower power generation from coal this year compared to the previous year, but there are clearly some countries where the change is already indicating that the end is near for coal plants. The graph above shows the top 10 countries in Europe where coal generation has declined the most in absolute terms. From this ranking 6 countries – Germany, Spain, Portugal, Greece, Netherlands and Romania – have reduced their coal generation by more than 1/3.

Top 3 countries where coal power generation has shrunk the most this year by both criteria are:

1. Portugal (-97%)
2. Spain (-58%)
3. Greece (-49%)

Coal power plants are closing down in Spain, Portugal and Greece – way ahead of schedule

Last week, one of the leading national newspapers in Spain, El País, announced that 7 out of 15 of the remaining coal plants in the country would shut down on 30 June 2020^[1]. Overnight, the Spanish coal generation capacity dropped from 9 GW to 4.5 GW and four more plants are applying for closure permit^[1]. This comes hardly as a surprise to many, as economics of coal plants have deteriorated over the past years. This is because there are cheaper alternatives to generate electricity, and CO2 prices in Europe have sky-rocketed during the last years. Our Energy Transition Lab shows that coal plants already had low running hours before the announcement. Spain is the only country of the three where the government did not have a fixed deadline for coal.

The outlook for coal in Portugal and Greece is not looking much brighter. Portugal relies on coal the least of these three countries. This year, they reached a new record of 59 days without coal, which is visible in our tool. Market spectators are expecting the last two coal plants to close down by 2021 and 2023 the latest, but noted that now it’s looking like this will happen sooner^[2]. Greece has pledged to close down its coal plants by 2028.

How could the rest of the world reach high share of renewables?

Countries like Portugal, Spain and Greece have managed to let market forces do their magic and keep political wrangling to a minimum. The good news is that economics and political momentum will continue to push the rest of the world towards high renewable energy systems - with Europe on the forefront. However, each energy system has unique characteristics. This means that the solutions will be different for different countries.

The key for integrating higher shares of renewable energy is to provide enough system level flexibility. Portugal, Spain and Greece have good amounts of hydro capacity in their systems that accomplishes this. As the energy transition progresses, fast starting gas power plants, energy storage and Power-to-X will be some of the key solutions to enable system level flexibility.

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