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EDP ​​joins Endesa and recovers coal production in Los Barrios | Companies

The coal is back. Against all odds, the rise in gas prices in international markets has turned black mineral into a fuel more competitive than gas, despite the fact that, being more polluting than this, it must pay three more times for CO2 emission rights (with a rate per ton of 0.4 and 1.2, respectively). This circumstance, unthinkable a few months ago, has made the electricity companies that still maintain their facilities, although almost all with a closure request pending before the Ministry for the Ecological Transition, to reactivate their production.

To the decision of Endesa to resume activity at its central As Pontes (A Coruña) for which it has acquired 190,000 tons of coal, now adds that of EDP ​​Spain, which has decided the same for the central Los Barrios, in the Bay of Algecira (Cádiz), one of the Viesgo assets that the subsidiary of the Portuguese energy company bought from the Australian fund Macquarie in July 2020. EDP sources confirm that Los Barrios is preparing to recover production, in sight that it can now compete comfortably with gas.

Taking into account only the price of energy and CO2 as variable costs and excluding the hourly distribution of the price in the electricity market, the differential between gas generation (using the Dutch TTF) and coal (API 2) jumps at sight: in the spot, the coal margin is currently 100 euros / MWh, compared to 17 euros / MWh for gas, with a spread over 80 euros in favor of that one. For 2022, coal continues to gain, with a variable margin of 25 euros / MWh compared to 4 euros / MWh for gas. Surprising data considering that, until last summer, the spread coal was negative.

Power plants with plants still operating, but which were expelled from the market in 2019, when the Government decided to eliminate the so-called green cent rate for natural gas and keep it on coal, already punished by the EU decision to raise the CO2 rights prices by limiting your supply, they have decided to take advantage of the occasion to go back to pool. Generation with coal in this time has been limited to the restricted market, although so far this year a slight increase in production has been observed, above 2019.

This is the case of Endesa and EDP, since the few conventional thermal plants in Iberdrola and Naturgy they are already in process or about to be dismantled. Not so those of its competitors. In 2018, Endesa requested the closure of its large national coal facilities, those of Compost (Leon) and Andorra (Teruel) and, already at the end of 2019, requested the ministry that directs Teresa Ribera, the closure permit for those that use imported ore (As Pontes and Carboneras, in Almería). What the company called “the discontinuity” of the activity of these plants. A decision that forced her to make a provision for accounting impairment of 1,300 million.

Respite for the ‘pool’

Industry sources assure that the return of coal, despite going against the energy transition, has been well received by the ministry and the system operator, REE. At the end of the day, is what they are doing countries like Germany and Poland, and can give the wholesale market a breakIf the marginal price is marked by coal, now lower than that of gas, although it provides a greater margin to generators.

From the moment a facility receives administrative authorization, the owner has one year to formalize the closure, but this only ultimately depends on the will of the company. If that year passes, the permission of the ministry lapses and, if applicable, you must reapply.

Both As Pontes and Los Barrios are within a one-year period in which they could continue to operate, without closing the door to its closure in the medium term. In fact, both Endesa and EDP insist that it is a conjunctural measure. Also Carboneras, about which rumors circulate that the Spanish subsidiary of the Enel group could reactivate it due to its excellent location, is in the same case. A spokesman for the power company denies it: “there is no longer any operation or equipment to function and the last burning took place three weeks ago.”

Although in the electricity company they claim that the regulation obliges the plants to make offers in the market, which justifies their decision on As Pontes, the truth is that none of them has had availability to operate and, in many cases, not enough mineral in its parks.

Hydrogen project at the Cadiz plant

Reconversion. In July 2020, the EDP group, in line with its competitors, communicated its decision to renounce the license to generate coal in the Iberian Peninsula, which affected its Portuguese plant in Sines and the Asturian plant in Soto de Ribera 3. The energy company chose, however, to maintain its Aboño plant in Gijón, which will be reconverted to burn Arcelor’s iron and steel gases and will maintain electricity production as support in case of unavailability and as a guarantee of supply. However, EDP’s strategy is to phase out all of its coal by 2025.

Hydrogen. For Los Barrios, one of the assets it acquired from Viesgo, in addition to its distribution networks, was the previous owner who requested its closure in 2019 from the Ministry of Ecological Transition. In the case of the Cadiz power plant, EDP has a project for the production of green hydrogen and a 255 MW lithium battery warehouse, with an investment of more than 550 million. The future plant will allow the supply of renewable energy for the entire industrial environment of Campo de Gibraltar and export by sea. The goal is to turn this environment into a hydrogen pole to decarbonize nearby industries.

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