The performance of Portugal and Spain on the road to decarbonisation is "helped in large part by the economic contraction resulting from the economic crisis," Moody's says.
Moody’s rating agency said Tuesday that Portugal and Spain are “well positioned” to achieve the decarbonisation targets for 2020 due to the impacts of the economic crisis, but those of 2030 will be “more difficult to achieve”.
“Spain and Portugal are on track to meet their binding decarbonisation targets to reduce greenhouse gas emissions under the European Union’s [EU] Effort Sharing Decision (EPD),” Moody’s said in a report released Tuesday.
For the US rating agency, this path is “largely helped by the economic contraction resulting from the economic crisis,” something also reflected in the energy sector.
“Both Spain and Portugal are well positioned to achieve their non-binding energy efficiency targets, mainly because of the economic downturns after the financial crisis, but also because energy efficiency measures are slowly progressing,” adds Moody’s.
The institution predicts that Spain and Portugal will “probably reach their binding targets of generating 20% and 31% of their final energy consumption from renewable sources by 2020.”
“This happens despite the slow growth of renewable energy capacity in recent years, which was caused by a renewable investment gap in the middle of the decade when both countries ended with subsidies to cut deficits in the system,” the agency continues. But “achieving the EU’s 2030 goals will be much more difficult,” warns Moody’s.
By 2030, the New York-based rating agency says “the power generation sector is likely to play a major role,” with “a decline in greenhouse gas emissions of over 70% and 80% compared to 2005 in Portugal and Spain.”
“In the next two to three years, we expect the decline in the profitability of [energy] generation from coal to drive mainly the decarbonisation of the energy sector,” predicts Moody’s.
The institution also highlights the role of the companies, highlighting that “electricity retail activities will become strategically more important as a facilitator of renewable sources” due to the move from “a subsidized model to a market model”.
However, Moody’s warns that ‘the removal of coal will not be to the advantage of Endesa and EDP, which have greater exposure to this generation’, but hopes that ‘both groups will manage the situation’, since ‘coal-fired power generation in the Iberian Peninsula is no longer profitable’.