The European Commission will decide next week whether to authoriseSpain's subsidies for its coal sector, amid warnings that giving the green lightwould scupper theEU's plans to phase out subsidies tounprofitable coal mines.
Spain is seeking approval from the EU's competition authorities for a new schemethat grants priority access to the wholesale electricity marketfor power plants that burn domestic coal.
Spain's National Energy Commission has predicted that the plan would cost generating companies 800 million euros to implement.
To justify this under EU internal competition rules, Spain is using a little-known clause in the EU's Electricity Directive, which allows member states to give priority to the dispatch of power stations that use indigenous fuel sources "for reasons of security of supply".
Authorising Spain's plan poses a dilemma for the European Commission, as it would run counter to the plannedphase-out ofstate aid to coal plants. It tabled a draft regulation in July that would allow member states to grant operating aid to coal mines only if they close themby 15 October 2014.
The decision was postponed last July and is now scheduled to be taken next Wednesday (29 September). The Commission's state aid chiefs will hold a preliminary discussion tomorrow.
Environmental group WWF disputed the proposal, saying that Spain has been a net exporter for at least the last six yearsand thus is not short of electricity.
"The claim that electricity supply on the Spanish system is at risk of interruption due to insufficient generation, or that it is likely to become so, is not credible,"the groupsaid in a letter sent to EU Competition Commissioner Joaquín Almunia, a Spaniard, last week.
"Spain is abusing these public service provisions to disguise public aid to its coal mines," said WWF's Mark Johnston.
Moreover, the WWF warned that if the scheme were approved, it could replace the state aid given to uneconomic coal mines, potentially making a temporary derogation from internal market rules permanent. Although the Spanish plan is limited in time, the authorities could notify an extension based on the initial approval, it said.
Spain's energy sector is undergoing deep changes as growing renewable energy production and the recession have been squeezing out coal, Johnston said.
Spanish coal miners have threatened to strike this week over unpaid wages. They are demanding that the government must implement the delayed state aid plan.