Spain
Pedro Sánchez Presents a €200 Billion Green New Deal to Turn Spain's Economy Upside Down
The Spanish president presented to Wall Street investors his 2021-2030 plan to shift the country to green energy with less dependency on imports.

 BlackRock, Morgan Stanley, Blackstone, Bridgewater Associates, Brookfield Asset Management, Soros Fund Manager, Centerbridge Partners and Global SWF are some of the international investment funds that sat in New York at the end of September with the acting President of the Spanish Government, Pedro Sánchez, to listen to his diagnosis of the future of the European country's economy.

International investors were particularly concerned about the future, given the difficulty of predicting the political and regulatory outlook. These factors are essential to ensure medium- and long-term investments in funds with a presence in the energy and infrastructure sector. What Wall Street fears the most are changes within the legal framework.

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The Sánchez administration introduced an energy Marshall Plan for the next 12 years, called the Integrated National Energy and Climate Plan (PNIEC) 2021-2030, intending to mobilize more than 200,000 million euros in investments (236,124, to be precise), of which nearly 80% will come from private capital. All for the energy transition, a project so ambituous it has merited the creation of a new ministry.

But the outlook is far from stable: shortly before the summer, the National Commission on Markets and Competition (CNMC) presented drafts of an energy reform bill that contemplate, among other things, sharp cuts in compensation to the gas sector and, to a lesser extent, electricity, an issue that has put companies on the defense and raised alarms among investors. In addition, this body is immersed in a complex process of renewal of 6 of its 10 councilors, including its chairman, which could hinder the energy reform.

A scenario that makes it difficult for investors to arrive in Spain in one of the few undisputed vectors of growth that are glimpsed globally. In the country, and the rest of the world. Energy, climate change, decarbonization, renewables, oil replacement... are issues on the international agendas with specific dates.

But Spain continues in a political blockade (fourth general elections in less than four years) and, therefore, institutional. All the polls show that a strong government will not emerge after the November election either, so would it be possible to repeat the elections in 2020? This has been repeated by several specialists in the media, such as Narciso Michavila. The situation makes both companies and investors fear the legal security and stability of the regulatory framework.

Pedro Sánchez tried to calm the international markets, but while he has to cope with a CNMC going through a complete recomposition, dictating drafts that will have great weight in the decisions of those same investors. It must be remembered that the acting president went so far as to define this transformation as "a righteous ecological transition" or "a new ecological illustration" that "will mark a turning point for Spain".

Pedro Sánchez needs to attract more than 150,000 million euros in investments in energy in the long term, but while making that effort he has to weather the instability transmitted by a CNMC going through a full recomposition, dictating drafts that will have great weight in the decisions of those same investors.

In addition to the investors, several specialists are calling for an end to the regulatory ups and downs of the energy sector, one of the most sensitive and permeable to investment. The CNMC's energy reform will be decisive in consolidating (or not) decades of constant investments that have allowed Spain, among other things, to become one of the leading countries in natural gas supply. And not only the investment funds are waiting, but the energy companies themselves have also taken matters into their own hands. Without stability, the legal claims, the pressure of the lobbies, will be unleashed, creating a complex spiral for the country.

A situation that occurs amid the economic slowdown facing Spain and Europe, in which any regulatory sway has a double impact, internal for companies and employment in Spain and external for international investors. Job creation in Spain suffered a sharp slowdown last September with the lowest growth numbers since September 2013.

Energy transition, but how?

The energy transition will be one of the main drivers of growth for Spain, with a horizon set for the next 30 years. However, "to this day, there is still some uncertainty about how exactly the decarbonized energy system will look like in 2050. It is necessary to establish a political and regulatory framework that will allow the decarbonization process to be started today", said Walter Boltz, a regulatory expert and member of the Agency for the Cooperation of Energy Regulators (ACER).

Eurogas General Secretary James Watson states bluntly that "more than ever we should invest in our gas distribution networks to ensure that they can supply the renewable gases and hydrogen from the new system", thus contributing to the decarbonization goals. To speak of decarbonization is to speak of mitigated emissions and global warming effects. And of new investments in networks, something in which Spain already has a long history."

For her part, the new president of the European Commission, Ursula Von Der Leyen, promised to implement concrete laws in her first 100 days in office to achieve a carbon-neutral Europe by 2050. With the support of Brussels for the most sustainable energies. The clock is ticking everywhere but, it seems, in Spain. It remains to be seen whether the situation will be clarified after 10 November.


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