The Tertiary Sector: Energy Sector Composition

Energy Sector Overview

The energy sector is a complex set of productive activities that are difficult to classify using conventional methods. It encompasses extractive activities (e.g., coal mining), industrial processing (e.g., refineries, power plants), and service activities (e.g., transmission, distribution, marketing).

Within the energy sector, a distinction is often made between “fuels” (coal, oil, natural gas) and electricity. It’s important to distinguish between primary energy sources (coal, hydrocarbons, nuclear, renewables) and secondary sources like electricity, which is generated from primary sources.

Developments in the Field

The link between energy and industrialization is well documented. In Spain, energy consumption has doubled in the last two decades, with a shift from a reliance on oil to a more balanced mix of sources.

Energy intensity, the amount of energy needed to generate a product, has been declining in Europe but has grown in Spain. Similarly, energy consumption per capita has followed similar trends. This indicates a lack of attention to energy savings and efficiency in Spain.

The energy sector currently accounts for 2.8% of Spain’s GVA and 20% of its imports. Its heavy reliance on imports contributes significantly to the trade deficit.

Production and Commercial Specialization

The Spanish energy sector is heavily reliant on oil, although its share in primary consumption has been declining. This has been driven by policies promoting coal, nuclear energy, and more recently, renewable energy. Natural gas and wind power have become increasingly important, with renewables accounting for 50% of installed capacity and 31% of production in 2008.

The optimal energy supply for a country depends on factors such as indigenous resources (low in Spain), the composition of energy consumption, and political decisions regarding security of supply, environmental impact, and the cost of different sources.

Productive Efficiency

Until two decades ago, the Spanish energy sector, which was heavily protected and regulated, suffered from efficiency problems. Restructuring, deregulation, and new regulations have led to improvements in overall efficiency.

One way to measure efficiency is through competitiveness. Energy branches have increased real output by about 50% since 1995. Energy prices, as an indicator of efficiency, have evolved more favorably in Spain than in Europe over the past two decades.

Oil

Business Structure

Repsol remains the dominant operator, along with Cepsa and BP. CLH is the major owner of transport and storage infrastructure. Repsol, born from the privatization of state interests, maintains diverse stock ownership with a large fraction in the stock market, but control remains in domestic hands. BP and Cepsa are under the control of foreign capital.

Natural Gas

Natural Gas Company is emerging as a dominant operator in both wholesale and retail markets. The three major electricity operators (Iberdrola, Union Fenosa (merged with Gas Natural), and Endesa) are also key players. Enagas leads in transport, storage, and regasification. Gas Natural is owned by Criteria/La Caixa and Repsol.

Electricity

Despite deregulation, the electricity sector revolves around Iberdrola and Endesa, which account for about half the installed capacity and 80% of distribution. Union Fenosa, Hidrocantábrico, and Viesgo are smaller players.

Recent changes include:

  1. Endesa (owned by Italy’s Enel), Hidrocantábrico (owned by Portugal’s EdP), and Viesgo (owned by Germany’s E.ON) are now under foreign ownership.
  2. Major Spanish electricity companies have expanded into international markets, particularly Latin America.

European Energy Policy

European energy policy focuses on:

  • Secure energy supply (requiring infrastructure and interconnections)
  • Improved competitiveness to reduce costs and prices, moving towards an Internal Energy Market
  • Sustainable economic development from an environmental perspective

Key developments include:

  1. Liberalization and the move towards an Internal Energy Market began in the late 1990s.
  2. A second package of directives in 2003 further reinforced liberalization.
  3. Following the 2007 European Council, a third package was launched in 2007, with approval expected by mid-2009.