Regulators Block France-Spain Link Proposal
Plans to build a gas interconnector between France and Spain suffered a setback on January 23, when regulators in the two countries said they could not back the project in its current form.
French energy regulator CRE and the Spanish competition watchdog CNMC said they had assessed the "Step" project promoted by TSOs Terega in France and Enagas in Spain under EU rules on projects of common interest, but found it lacking.
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"The project as it stands does not meet the needs of the market and lacks sufficient maturity to be considered," Spain's CNMC said after the regulators issued a joint statement.
In particular, the two regulators were concerned the project would only offer capacity on an interruptible basis. "Therefore, the capacity offered by this project cannot be contracted on a firm basis by the market," they said, saying that this was a negative factor given the aim to bring competitive and stable prices for end users.
In its current form, Step envisages 120 km of new pipeline in Terega's network in soutwest France at a cost of €290mn ($329mn), and 108 km of pipelines on the Spanish side of the border at a cost of €152mn.
The regulators said there was insufficient proof that additional capacity was needed by the market following several market tests (including market consultations in 2018) when no capacity bookings were made). They stressed that current interruptible capacity between the two countries of around 225 GWh/day - was underused "...demonstrating, once again, the lack of attractiveness for non-firm capacity to the market."
The regulators also felt costs were too high compared with other European projects and that it would not guarantee price coupling between France and Iberia.
Step is already a scaled-down version of the previous MidCat project to further integrate the Iberian peninsula into the European gas grid. Iberia remains very much an "energy island" with only limited connections to the north. Linking it to Europe would open up new routes for Algerian gas into Europe via Spain, as well as cutting Spain's dependence on Algeria and imported LNG.
The regulators said they remained committed to projects integrate the two countries' gas markets but could not back the TSOs' current investment request, and called on them do further work on the Step project to ensure it meets the needs of the market.
An Enagas spokesman said the company would respond to the requirements of the regulator. Terega was not immediately available for comment.