Porto, 27 July (Argus) — The Spanish government has defended its right to subsidise its domestic coal sector, and says it will resist European Commission attempts to force mine closures.

The commission's proposal to force the phasing out of operating subsidies for hard coal mines by October 2014 would lead to the shutdown of unprofitable mines. This would be unlikely to boost Spanish power prices as, despite subsidies, domestic coal already struggles to compete with imports.

Spanish generation margins for thermal generators are under pressure, as the wind, hydro and nuclear sectors often provide sufficient power to push the wholesale price below fuel burners' operating costs, and limited interconnection prevents unfettered sales of excess power into the higher priced French market.

In contrast with the commission's plans, the Spanish government has introduced legislation to promote the burning of domestically mined hard coal at its power plants, through a system of feed-in tariffs. The legislation has not yet been implemented and the commission is considering an amended version after objecting to a compensation mechanism for displaced producers.

Spain's industry ministry said the commission's plan to phase out coal mining subsidies is a proposal, not a final decision, and that Spain would fight for its modification or abandonment in the European Council and all other bloc institutions.

The ministry said that as coal is Spain's only significant indigenous fossil fuel, it is a strategic resource, and added that the four-year time line for mine closures took no account of the socio-economic effect on communities reliant on the industry, particularly in a time of economic crisis. The ministry also said the commission's plans were in conflict with other European states' national policies, claiming that Germany has plans to continue mining until 2018.

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