In response to a controversial government proposal to penalize electricity self-consumption in Spain, the country's largest utility, Endesa, says it views battery storage as a serious threat.

In early June, the Spanish Ministry of Energy proposed a tax on solar-plus-storage systems of $10 per kilowatt of capacity -- a fee that would destroy the economics of such systems.

Endesa seems to be the only utility in the country grappling with the implications of fighting distributed energy.

“The process of price reduction and technological improvement being experienced by batteries means we face a situation unknown up until now in the electricity sector,” wrote the company in papers filed in June.

"The supply of electricity is going to have to compete with alternatives based on local generation of energy supported with storage from batteries," concluded the utility.

Endesa’s 22-page list of observations on the proposed Royal Decree on self-consumption was admitted by the Spanish Ministry of Industry, Energy and Tourism as part of a consultation process that brought a lot of angry feedback from consumers this summer.

The utilities Gas Natural Fenosa and Iberdrola, along with the utility industry body Unesa, also commented on the proposed law. Most of their observations were technical in nature, with practically no mention of batteries or storage.

The timid responses from those utilities led pressure group Quiero Auditoría Energética ("I Want an Energy Audit") to proclaim that the feedback seemed "like compliments.”

Concerns that the government has been conspiring with utilities to curtail self-consumption were not assuaged when Alberto Nadal Belda, secretary of state for energy, appeared to lift a line from Iberdrola’s consultation document during a commission hearing.

“Self-consumption is not energy efficiency,” he said, parroting the second item in Iberdrola’s list of changes to the text of the proposed law.

Against this backdrop, Endesa’s comments on the legal text stand out by at least offering a realistic assessment of the current outlook for self-consumption in Spain, along with a possible way forward.

The paper pointed out that Spain’s current electricity tariff structure includes a number of “other environmental and energy policy costs” that should rightfully be included in the national budget rather than being passed on to consumers through energy bills.

“All this has resulted in an electricity tariff where approximately half the final costs correspond to taxes or energy policy costs aside from supply,” it states. “These costs were forcibly assumed by clients who had no real source of alternative supply.”

Endesa then said that the avoidance of these charges is what makes self-consumption an attractive option for consumers in Spain, despite the fact that a more efficient way to achieve renewable energy targets would be to invest in large-scale solar plants.

The utility agreed with the ministry’s core proposal of imposing charges on self-consumption. “In fact, from a conceptual point of view, the proposal is almost faultless,” concluded its comment paper.

But then the company, which has been owned by the Italian power giant Enel since 2007, raised a number of points that seem to have escaped ministry officials.

The law, Endesa said, is “extremely difficult to explain to the public. It is hard to understand why a consumer should pay charges when they are generating electricity exclusively for their own consumption, since this does not appear to create any additional costs in the system.”

Furthermore, said the utility, it will be almost impossible to police the law given that self-consumption takes place on a customer’s premises. “No inspector or authority can access the inside of a home without the consent of the consumer, unless they have a court order.”

Finally, the utility noted: “This Royal Decree project is radically opposed by the whole of the photovoltaic sector and has reached a high level of politicization, to the point that almost all the current opposition parties are against self-consumption charges.”

For the team led by Juan José Alba Rios, Endesa’s director of regulation, “the only sustainable long-term solution that can lead to greater efficiency of the system is to establish a supply cost that reflects precisely that, the ‘real’ cost of supply.”

In practice, this would mean removing extraneous costs from the electricity bill and covering them in the national budget.

This would mean, said Endesa, that “it would not be necessary to regulate self-consumption with interventionist measures. Any consumer would be free to install PV panels, batteries or any other form of self-consumption without it being a cost for the system, now or in the future.”

Endesa’s proposals may have been a little too radical for a government committed to passing the self-consumption bill as quickly as possible in advance of general elections later this year.

Instead, a revised bill put before Spain’s Council of Ministers contains a number of changes that are only “minor improvements,” according to Daniel Pérez, legal counsel for the renewables-focused pressure group Platform for a New Energy Model.

And while the earlier draft penalized PV-and-battery systems more than solar-only installations, in the current draft all systems pay fixed and variable charges so “there is no discrimination against batteries; everything is treated equally badly,” Pérez commented.

With approval of the draft not expected until sometime in September at the earliest, there is still room for further twists in Spain’s self-consumption saga.

“The opinion of the State Council is still pending,” said Pérez. “We would not rule out the possibility of more changes being introduced after the opinion is published.”