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Key Findings

Enagás, the Spanish monopoly gas transmission system operator, profits from a regulatory system that guarantees a fixed rate of return on infrastructure investment, regardless of whether or not the country actually needs it.

Spanish gas demand has declined since 2008, and consumers have been left to pick up the tab for unused infrastructure. The resulting overcapacity means low utilization rates for gas infrastructure assets in Spain, as well as some of the highest gas bills of any European nation

Executive Summary

The profits of Spanish gas transmission system operator (TSO) Enagás (an abbreviation of Empresa Nacional de Gas) are driven not by consumer demand for natural gas or company efficiency, but instead by a regulatory system that guarantees Enagás a fixed rate of return on its gas infrastructure investments, regardless of whether the country actually needs them. Over the years, Enagás has used “security and diversity of supply” as an excuse for building or expanding liquefied natural gas (LNG) regasification terminals, natural gas pipelines and gas storage facilities. However, these investments have led to very low utilisation rates for gas assets as well as some of the highest gas bills in Europe. Gas demand in Spain has declined since 2008, and Spanish consumers are left paying incredibly high rates for unused infrastructure. Enagás’ top two shareholders, with 5% each, are the Spanish government and Amancio Ortega, a Spanish billionaire.

In general, IEEFA finds that the regulated returns structure has been complex with a lack of clarity in some areas, making it difficult for a third party to analyse and increasing the risk of overpayment. In the new regulatory framework (2021-2026), some components of Enagás’ remuneration have been decreased but others have increased. This raises doubt as to whether profits will really be reduced to better protect consumers during this new regulatory period.

Enagás plans to invest in new projects driven by the “decarbonisation pathway to net zero greenhouse gas emissions by 2050,” on the basis that renewable gases are needed to decarbonise Spain’s economy.1 This situation raises two critical questions: How can regulators guarantee that these new investments won’t create more stranded assets in the future, and how can they guarantee customers won’t be forced to foot the bill—yet again—for unnecessary gas projects? In IEEFA’s view, there is a significant risk that the past mistakes of overbuilding infrastructure will be repeated, and that Spanish gas consumers will be forced to cover the costs.

1 Biogas, biomethane, green hydrogen, and synthetic natural gas (SNG) are all described by Enagás as renewable gases.

Ana Maria Jaller-Makarewicz

Ana Maria Jaller-Makarewicz is an energy analyst for IEEFA’s Europe team. Her research focuses on topics related to gas and LNG, as well as other relevant European energy issues.

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Arjun Flora

Arjun Flora is Director of Energy Finance Studies, Europe. At IEEFA, Arjun is responsible for leading and building the Europe team, partnering with funders, campaigners and investors to maximize IEEFA’s impact. As a research analyst, he covers several topic areas relating to the energy transition in Europe, including power utilities, gas infrastructure, sustainable finance, renewable energy, energy markets and consumption trends.

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