November 6, 2017 Read More →

Endesa Coal Upgrades ‘Risky’: IEEFA

Research RBCCM European Utilities (Equity):

US-based sustainable energy think tank Institute for Energy Economics and Financial Analysis said yesterday that Endesa may never recover the €400m cost of upgrading three of its Spanish coal-fired power stations. Endesa plans to spend €100m in upgrades at the 530MW Alcudia plant, and a further €300m at the 1,469MW As Pontes plant and 1,159MW Litoral plant. IEEFA said the investments likely will end up stranded if the EU proceeds with commitments related to the 2015 Paris Agreement on climate change. The Paris Agreement effectively mandates phase-out of coal-fired generation across the EU by 2030 or soon after. Endesa has confirmed that the upgrades aim to extend operational lives at the plants to 2030-2035. The upgrades are also intended to achieve compliance under the EU’s Industrial Emissions Directive and recently revised air quality standards known as the LCP BREF, to take effect in 2021. Emissions rates at Alcudia, like Litoral, were far above the revised BREF limits and the median of EU power plants.

So what?

With the Spanish government busy with all things Catalonia in the meantime, changing its stance on coal power production and other energy policies (particularly one that that’s not “broken” for now) isn’t going to be top of the agenda. Furthermore for Endesa, maintaining a fleet of baseload generation will help with its short power position (i.e. retail power sales exceeds generation measured in GWh) where any shortage of power from generation will mean Endesa needs to go out to the market and buy at expensive prices. A more cautious spending by Endesa however would be advisable. Because even though Spain hasn’t changed its energy policy with regards to coal power production, a growing number of European neighbours have moved to end production in line with the Paris Agreement, including Italy and UK (both by 2025), the Netherlands (by 2030), and France (by 2022). Germany’s stance remains unknown and pending government coalition negotiations.

Endesa coal upgrades ‘risky’: IEEFA

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