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CHAPTER 3 Our Environment Economic and industrial environment · Business model

GAS AND POWER

In 2015, after several years of steady decline, electricity demand rose. Cu- rrent electricity production in Spain is characterised by:

Overcapacity of production facilities.

Increased demand.

Regulatory framework (self-con- sumption and alternative energy sources).

Regarding natural gas, in Spain im- ports account for 99.7% of demand:

53% of natural gas (NG) consumption and 47% of liquefied natural gas (LNG).

Incoming gas through the pipeline sys- tem is currently close to its maximum capacity and therefore fluctuations in demand have to be covered with LNG, increasing the number of short-term contracts.

The domestic NG market is dominated by three companies: Gas Natural Fenosa, Endesa and Union Fenosa Gas, with 72% of the total market, together with mino- rity groups trying to gain market share.

CURRENT SITUATION

2016 · 2020 OUTLOOK An annual compound growth rate of 2.1% in electricity consumption for the period 2012-2040 has been estimated. Within the European Union this growth will be lower, with a CAGR for the same period of 0.7%.

At a European level, the gas market is expected to evolve towards greater integration and connectivity between

distribution centres. The changeable climate in the world gas market will affect European competitiveness and the supply mix to a greater extent than future regulation.

However, due to future regulations aimed at reducing CO2 emissions, gas demand is expected to grow more than oil demand by 2030 (1.9% v. 1.0%).

2015 · 2030

2015

2015 · 2030 OUTLOOK

6000

4000

2000

0 Oil Gas Coal Nuclear RenewablesHydro

(Mtoe)

1.035 639

202 263

622

671