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<The electricity sector in Spain is competitive since the opening of a national electricity market on January 1, 1998, and its expansion throughout the Iberian Peninsula with the opening of MIBEL, on July 1, 2007. The market is now dominated by three large utilities, whose combined output represents nearly 80% of the total. With 31% of production and 33% of the installed capacity in 2009, Iberdrola has become the largest operator in the country, and one of the largest power companies in the world. Endesa, now a subsidiary of the Italian group Enel (29% of production) ranks second, while Unión Fenosa bought by the gas giant Gas Natural in early 2009 ends up in third place with 21% of the national production. This concentration is also observed in the distribution sector, where those three companies account for 94% of the market, leaving a tiny share for the remaining 326 local distributors.

Since the introduction of electricity in Barcelona and Madrid early in the second half of the 19th century, the industry has experienced several episodes of growth and decline, phases of laissez-faire followed by periods of interventionist policies as well as waves of concentration, moving the sector towards its current oligopolistic state. Each of these phases is characterized by the rise of a type of generation: hydroelectricity dominates during the first half of the 20th century, replaced by oil-fired and nuclear generation to meet the rapidly increasing demand of the Spanish miracle era. With the 1973 oil crisis begins a decade of turmoil for the Spanish electricity sector. Fuel availability and high prices forces utilities to diversify, by building coal-fired units and nuclear power stations, until the government implements a moratorium on new nuclear builds in 1984. Spain embraced wind power early and enthusiastically and became a world leader, while combined cycle gas turbines quickly became the new backbone of the industry.

In, 2008 Spain consumed electricity 88% compared to the European Union 15 average. Spain exported about 3% of the produced electricity in 2009. The volume of renewable electricity rose 5% shares of the electricity use in 2009 compared to 2004 and was about 26% of the electricity use in 2009. The share of nuclear power declined notably between 2004 and 2005. The volume of nuclear power pro person has declined smoothly during 2004-2009.

Precursors (pre-1900)
The first application of electricity in Spain dates back to 1852, when Domenech, a pharmacist in Barcelona illuminates his shop with "a method of his own invention." The same year, Madrid's Armory Plaza and the Congress of Deputies are illuminated using a galvanic cell. The first dynamos are introduced in Barcelona in 1873 and the first electricity company, La Maquinista Terrestre y Maritima is established in 1876. It generates its electricity by connecting a dynamo to the steam engine of frigate Victoria, docked three kilometres away from Barcelona. It is followed by many other companies in the last two decades of the 19th century. But all these new entrants face the same problem: they generated direct current, which was them impossible to transport over long distances, forcing plants to set up near their customers.

Development of hydropower (1900-1950)
The introduction of alternating current (AC) in the early 20th century transformed the the nascent industry by allowing the transmission of electricity over long distances. Companies are formed to harness the potential of the country largest rivers: the Ebro (Hidroelectrica Ibérica), the Douro (Saltos del Duero), the Júcar (Hidroeléctrica Española), Saltos del Sil, Hidroeléctrica de Cataluña, Hidroeléctrica Cantabrian, Saltos del Nansa, Hidroeléctricas Fuerzas del Segre. In 1929, the total installed capacity is multiplied by 12 compared to 1901 and reaches 1,154 MW. Eighty-one percent of that capacity comes from hydropower.

At the outbreak of the Spanish Civil War in 1936, the plant capacity reached 1,491 MW, with the commissioning in 1935 of the Ricobayo Dam on the Esla, a tributary of the Douro. The output of the new plant adds to the surplus capacity. Over the following years, newly commissioned power stations will be insufficient to offset the loss of facilities damaged or destroyed during the conflict. In 1944-1945, the country finds itself in a shortage.

Like the rest of the Spanish economy, the electric power industry faced serious problems at the end of the Second World War, as an economic blockade reduces imports as well as the consequence of the autarkical economic policies of the first half of the Franco dictatorship. Pricing policy, which stabilized electricity rates despite a rising inflation, increased demand but reduced investments in new facilities. The 1944 deficit became a chronic condition in the latter half of the 1940s.

These problems arise in conjunction with a reorganization of the industry. Hidroeléctrica Ibérica, an integrated company active in the Basque Country, merges on September 30, 1944 with Saltos del Duero, owner of the Ricobayo Dam to create Iberduero SL. Strictly a private venture before then, electricity becomes a matter of State, who takes a more active role in the sector with the creation of Endesa (Empresa Nacional de Electricidad) in 1944 and ENHER (Empresa Nacional del Hidroeléctrica Ribagorzana) in 1949.

Maturity (1950-1990)
The development of large rivers of Spain steps up during the 1950s and 1960s, dubbed the Spanish miracle years, with the construction of the country's largest hydropower power stations. Iberduero commissions two large facilities on the Douro, the Saucelle Dam in 1956 immediately followed by the Aldeadávila Dam in 1963. Hidroeléctrica Española inaugurates the Alcántara Dam in 1970.

Hydropower development is however limited by the availability of compatible sites, and its relative importance in domestic supplies decreases rapidly. From a peak of 84% in 1960, hydro generation dropped to 50% of the installed capacity ten years later, while the country's capacity almost tripled from 6,567 to 17,924 MW between 1960 and 1970.

For these reasons, companies are turning to oil-fired thermal power stations and nuclear energy in the late 1950s. The first nuclear unit, the 153-MW José Cabrera Nuclear Power Station, is built in Zorita, near Guadalajara, is commissioned by Unión Fenosa at the end of 1968. Spanish consortia commissioned two more nuclear power plants in the following years: Santa María de Garoña in 1971 and Vandellós I the following year.

The 1973 oil crisis has serious consequences for the country, which is slow to react to the new situation. A series of new oil-fired power plants, planned as part of the first National Energy Plan of 1969, were rolled in between 1973 and 1976, but economic viability of these units became unclear as oil prices increased six-fold in less than a year.

With oil-fired plants operated sparingly because the high cost of fuel, an accelerated construction of coal-fired power plants is implemented, particularly in coastal areas. In addition, five new nuclear units are commissioned between 1980 and 1986 at Almaraz, Ascó and Cofrentes adding 4,500 MW of baseload power. Despite the nuclear moratorium – ordered in 1984 by the Felipe González socialist government – two other plants come into production in the late 1980s: Vandellós II in 1987 and Trillo in 1988.

Consolidation and open markets (since 1990)
In the late 1980s, the sector has experienced a difficult period. The industry does not have sufficient income due to pricing policies imposed by the government are lower than inflation, it is breathless by the significant investment required to build the nuclear fleet and the under-utilization of Park fired thermal oil, relegated to sporadic use during peak periods. Beginning in 1985, develops a market 7,000 MW, which can improve the fate of some companies that have made ​​the shift from oil substitution.

A new formula for calculating the price of electricity, called the Marco Legal y Estable, improves the financial position of the industry by setting new pricing rules that take into account investments, the cost of generation and distribution, while introducing a compensation mechanism for participating companies. This return to financial health coincided with a new consolidation of existing businesses, creating a few major players. Endesa buys out Sevillana de Electricidad, and gets a stake in Fuerzas Eléctricas de Cataluña (Fesca), Hidroeléctrica Cataluña (Hidruña) and Eléctricas Reunidas de Zaragoza. Around the same time, Bilbao-based Hidroeléctrica Española and Iberduero merge to create Iberdrola.

The first steps towards a competitive electricity market are taken in the mid-1990s with the passage of the National Electric System Organization Law (LOSEN), the creation of a government-owned transmission operator, Red Eléctrica de España, as the European Union implements Directive 96/92/EC setting common rules for internal electricity markets. After consulting the industry, the government passed Electric Sector Law 54/1997, creating a national electricity market on January 1, 1998.

The opening of the Spanish market to European companies, including Germany's E.ON and Électricité de France (EDF), increase fears of a loss of control of the sector. Spanish companies undertake a series of talks to create a "national champion" in order to compete with large foreign companies. Talks between Repsol and Iberdrola abort in 1999, then a marriage between Iberdrola and Endesa collapses in 2001 after partners balk at the conditions imposed by the Spanish government.

Another merger, this time between Iberdrola and Barcelona-based Gas Natural also failed in 2006 because of the insistence of the gas distributor main shareholders to control the board of directors of the merged entity.

Speculation of a union between Iberdrola and Gas Natural resumed in 2008, when infightings between Acciona and Enel Endesa by a hostile takeover bid from E.ON, merges with a consortium led by the Italian energy giant ENEL. The presence of the Spanish public works company was imposed by Madrid, which feared a foreign takeover. Enel buys Acciona's minority in Endesa in 2009 for 11 billion euros.

Generation
Power stations in Spain generated 306 TWh in 2008, up by 38% from 2000. Natural gas was the main fuel source with 39% of output, followed by nuclear (19%), coal (15%), wind (10%), hydropower (8%), oil (6%). Other renewables – solar, biomass and waste – make up for the remaining 2%.

Electricity production from natural gas in 2008 was in Spain 122 TWh exceeding in Europe only by Russia 495 TWh, United Kingdom 177 TWh and Italy 173 TWh.

Renewable energy
In 2009 Spain produced 13% wind power compare to the  use of electricity (794/ 6,145) The wind capacity installed at end 2010 will, in a normal wind year, produce 14.4% of electricity, when the equivalent value for Germany is 9.4%, Portugal 14% and Denmark 24%.

Demand
According to IEA the electricity use (gross production + imports – exports – transmission/distribution losses) in Spain was in 2004 253 TWh, (2007) 282 TWh and (2008) 288 TWh, while the use was in 2008 in France 494 TWh and Germany 587 TWh.

Trade
Spain was a net importer of electricity at the outset of the liberalized electricity. As electricity trade with Portugal increased, the country became a net exporter in 2004, when export to Portugal offset imports from France.

Electricity pro person and by power source
In 2008, Spanish electricity consumption was an average of 6,523 kWh/person. Spanish electricity usage constituted 88% of the EU15 average (EU15: 7,409 kWh/person), and 73% of the OECD average (8,991 kWh/person).

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