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Ascer delivers a very strong message on FNSSE

January 2021

Ascer, the Spanish tile manufacturers trade association, has issued an unusually strongly worded attack on the proposed implementation of FNSSE (National Fund for the Sustainability of the Electric System).  Late last year the Spanish government proposed a new law that will gradually separate the funding of renewable energy from consumers' bills and move it to the balance sheets of suppliers, and oil and gas companies.

The mechanism would involve the creation of FNSSE to support the cost of renewable subsidies, which totalled Euro 7.2 billion in 2019, around 16% of household bills.

"The new mechanism will have a triple objective," the government said. "It would prevent increases in the cost of electricity, send clear signals of the electrification of the economy and generate clarity and equilibrium to the system which would encourage the necessary investment in the coming years."

Contributions to the FNSSE fund would come from sector players defined as "obligated subjects" or gas and power sellers, wholesale petroleum product operators, wholesale LPG companies and their associated consumers, among other regulated contributions such as from CO2 auctions and the generating tax, the government said.

A number of sectors would be exempted, such as power storage, diesel for farming, gas for power and cogeneration and kerosene for aircraft as well as certain large industrial power and gas consumers.

The government has also confirmed that it will pass into law its Large Industrial Consumer Mechanism, which will give certain consumers special rights to ensure greater certainty over their energy costs and improve their competitivity while abiding by European norms.  To qualify as a large consumer, the company must have consumed more than 1 GWh for two of the previous three years and consume at least 50% of its energy during off-peak hours.

In its stringing response Ascer stated: “The creation of the FNSSE is a new blow in the energy bill of the industry.  Its implementation would end the entire annual profit of the sector.  The fund torpedoes the competitiveness of the Spanish ceramic industry vis-à-vis our European and non-Union partners.  In the current situation, with companies experiencing liquidity problems and with great uncertainty, the impact of the FNSSE will be unaffordable for a large number of companies.”

“The cost generated by the implementation of the National Fund for the Sustainability of the Electricity System (FNSSE) in the five-year period 2021-25 for the ceramic sector would amount to an additional € 213.5 million; a figure that represents practically the entire annual benefit of the sector.  In the current context, in which companies in the sector present a weakened income statement due to the Covid-19 crisis, the impact of the FNSSE will leave a large number of companies out of the international market, since they will not be able to pass on this additional cost.“

“The FNSSE establishes a distribution between the energy sectors (petroleum products, natural gas and electricity) to avoid increases in the price of electricity, which would discourage the electrification of the economy and investment in renewable sources, contrary to the decarbonization objectives.  The obligations of the contributions to the FNSSE fall on the energy sector marketers, and the cost will end up being passed on to final consumers.

ASCER has presented a battery of allegations in order to defend the sector and the industry against a new lack of sensitivity of the government for the Industry, the only link in the economy that today is guaranteeing stable and quality employment and that is supporting largely the Spanish economy in this context of health and economic crisis.  The allegations are mainly aimed at preventing sectors that do not have an alternative to the use of natural gas, and that compete in international markets, from being harmed by the creation of this Fund.”

“The FNSSE will enter into force in a staggered manner in the 2021-2025 period, starting with a weight of 20% in 2021 and reaching 100% in 2025. Year in which, if this approach continues, the sector's energy bill will increase by 14 %.  This fund implies an extra cost for the sector without offering anything in return, when the sector has revealed the poor condition of the networks and the excessive cost of energy compared to its competitors.  So not only are there no means to improve the system, but also, it is intended to pay more for the same deficient system.  Once again the industry is harassed into abandoning gas consumption in an unrealistic time frame and without offering viable technical alternatives or guaranteeing its competitiveness. It is contradictory that the government insists on supporting the industry when mechanisms such as the FNSSE are proposed in parallel, which not only affects the competitiveness of the industry, but also totally discourages investment and the arrival of foreign funds.  The sector assumes its commitment to decarbonization, not in vain has it reduced its emissions by 50% in the last 30 years and is a leader in energy efficiency in its processes, however, it is necessary to be realistic and have a clear technical and competitive horizon to undertake that transition. Today there is no energy alternative to natural gas that guarantees technical viability and is competitive. Forcing the sector to make this transition in its current state means pushing it to its destruction and with it, the 60,000 jobs that depend on it

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