We spoke to Armando Martínez, CEO Global Networks at Iberdrola about cutting red tape to speed up investment, the important of frameworks and regulations and resilience during Covid-19.
Armando Martínez: Iberdrola is proving that tackling climate change can create value for both shareholders and society. Continued success depends on policy frameworks and regulation, technologies and cooperation to speed electrification by investing sustainably in energy systems based on smart grids and renewables. Expanding electricity networks will enable increasing integration of renewables. Grids also need reinforcing for increasing flexibility and electrification of other sectors, and to withstand climate-change impacts on infrastructure.
Encouragingly, governments globally are setting net-zero targets, involving society, and working with private companies to tackle climate change. Network owners/operators need fair policies based on the ‘polluter pays’ principle to deploy competitive clean energies. They require stable, predictable regulatory frameworks to incentivize long-term investments enabling electrification in key demand sectors. ‘Smart’ regulation can allow network companies to include a fair value for societal benefits in project planning criteria. Guaranteeing rules for fair, sustainable competition will encourage newcomers and innovation.
Red tape needs reducing to speed up investment. Regulatory uncertainty, especially retroactive measures, are some of the main barriers to investing in the transition. Subsidies for technologies or solutions should be transparent and limited. Governments should avoid hidden subsidies such as ‘virtual’ self-consumption. We have increasingly cost-competitive technologies such as wind and solar for the transition. Other transition-enabling technologies include pumped hydro storage, heat pumps, and batteries that can store more energy and at a lower cost. Digitalization is key. It can boost the low-voltage grid’s capacity to host distributed energy resources, helping to reduce carbon emissions while limiting investment needed for grid reinforcement. Hence, investment should focus on smart networks to enable the development and capital spend required for energy storage and renewables.
Reinforced, smart grids can avoid delays in integrating renewables and in consumer behavioural changes. Social costs of delay will greatly exceed the marginal cost of investing ahead of need. For example, lack of charging infrastructure delays the uptake of electric vehicles. Digital networks will allow flexible integration of new energy solutions and participation of new agents in the energy system; allowing end-users to provide demand side response solutions. Iberdrola is developing smarter, more-flexible network solutions to help mitigate the need for traditional reinforcement and reduce costs for our customers. We recognize that resources connected to our networks could solve network constraint challenges. We are therefore exploring flexibility markets with new and existing customers able and willing to control their generation, or who can modify their demand. Our UK business is seeking flexibility services through competitive tenders. Where appropriate, we consider non-wires alternatives (NWAs) to investing in grids. For example, the New York Public Service Commission is set to approve installation and ownership of a battery to improve service quality in a rural part of New York state. In our view, public-private-societal cooperation is the only way to accelerate the transition through greater electrification based on smart grids and renewables. For instance, the Smart Cities project promoted by our i-DE electricity distribution subsidiary in Spain has agreed with local governments to promote a city model with more efficient and sustainable services. This includes a focus on electrical mobility, network infrastructures, energy efficiency and public awareness. In addition, Spanish distributors including i-DE have collectively launched the datadis.es digital platform giving consumers free, secure, independent access to data on their consumption and contracted power, no matter which companies they deal with, or where. This lets customers manage energy use better, save money, and apply energy-efficiency measures.
Our energy system has proved resilient during the COVID-19 pandemic. We have maintained quality of supply, assured employee safety, and supported contractors for supply-chain continuity. The crisis will accelerate the transition by creating even greater need for economically and environmentally sustainable economic growth. Where possible, electricity network companies should accelerate planned investments. Every euro invested in distribution grids enables two euros of other investments in renewables and electrification. Spain's distributors plan to accelerate investment to support the European Green Deal which, analysts estimate, will create as many as 70,000 new, quality, stable jobs in Spain alone. This will cost Spanish electricity consumers less than EUR 0.50 per customer per year while mitigating pandemic-related economic effects that would otherwise delay Spain's 2030 National Energy and Climate Plan for at least three years.