Spain's energy lobby calls for higher proposed return on grid investment
A massive blackout that hit Spain and Portugal on April 28 reignited a debate about investment needs in the country's power networks and the return on such investments.
Power companies invest in grids in exchange for a stable return, which in Spain is currently set at 5.58%, with consumers ultimately paying that guaranteed rate through their electricity bills.
Aelec said the guaranteed return on investments for electricity distribution should be around 7.5%, a level in line with the rates being applied in other countries.
"We run the risk of capital flight and investment being attracted away from Spain to other European Union countries, thereby jeopardising the implementation of investments for the energy transition," Marta Castro, Aelec's head of regulation, told reporters.
The new remuneration will cover the 2026-2031 period. The CNMC proposal is open to feedback until August 4.
Spain's grid operator REE, owned by Redeia (REDE.MC), opens new tab, manages the trunk grid, and carries out investments envisaged in government plans.
Power companies including Iberdrola (IBE.MC), opens new tab and Endesa (ELE.MC), opens new tab control and invest in local distribution grids, which take electricity to the final customers.
Energy giants like Iberdrola and Enel have increased their focus in recent years on expanding and upgrading power grids while taking a more selective approach to renewable energy projects.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Guardian
an hour ago
- The Guardian
‘Outwitted': have water companies managed to sidestep Labour's bonus ban?
It started before the election. Against a background of growing fury about the conduct of the water companies, Labour promised to end the injustice of their executives getting bonuses while sewage was dumped in England's rivers and seas. In March 2024, Steve Reed, the then shadow environment secretary, said: 'Since the last election the water bosses have paid themselves £25m in bonuses. Labour will ban the payment of bonuses to polluting water bosses until they have cleaned up their filth.' The policy became a significant part of the election campaign two months later. The manifesto promised: 'We will give regulators new powers to block the payment of bonuses to executives who pollute our waterways.' Once in power, Labour went straight into action. One of the first big laws it passed was the Water (Special Measures) Act 2025. The legislation contains provisions to ban performance-related payments to senior executives of water companies that repeatedly pollute England's waterways with sewage. Reed, now environment secretary, described it as a means to end the 'undeserved' payments. Under the act, the government banned six water firms including Thames Water from awarding bonuses for this financial year after seven major pollution incidents. However, it was not long before flaws in this plan began to emerge. Thames Water has faced particular challenges this year, with regular discussions over its possible collapse, even as customers' bills soar to pay for infrastructure. In February, as the legislation was going through parliament, a court ruled that Thames could proceed with a controversial £3bn loan from a group of creditors, at a 9.75% interest rate, in order to stabilise the company. In May, the chair of Thames, Adrian Montague, told MPs on the environment, food and rural affairs (Efra) committee that bosses were in line for 'substantial' bonuses linked to the loan, on the insistence of creditors. The company needed to pay the bonuses, he said, 'because we have to keep staff. It is a very competitive marketplace out there … If we are unable to pay bonuses, people will come knocking and try to pick out of us the best staff we have. That is not in customers' interests.' Soon afterwards, the Department for Environment, Food and Rural Affairs announced plans to use the act to block Thames bosses taking bonuses. A week later, Reed appeared in front of the same committee, telling MPs that the bonuses had been withdrawn. At the same hearing Montague conceded in a letter that he may have misspoken when he said the bonuses were insisted upon by creditors. Reed told the committee that Thames Water had 'appeared to be attempting to circumvent that ban, calling their bonuses something different so they can continue to pay them'. Thames responded, saying that rather than having been withdrawn, the bonuses were paused. But in July the Guardian revealed that Thames had already paid bonuses totalling £2.46m to 21 managers on 30 April, and was refusing to claw the money back. Although it had paused the bonus scheme, or management retention plan (MRP), it did not promise that the next tranches would not also be paid, with the managers due to receive the same sum again in December and a further £10.8m collectively next June. Under the Water (Special Measures) Act, the only bonuses that can be stopped to those at the very top of the company, such as the chief executive, the chief financial officer and the chair. Chris Weston, the chief executive of Thames Water, has voluntarily declined his 300% bonus, because, he said, it would have been a 'distraction'. The water campaigner and former Undertones frontman, Feargal Sharkey, campaigned with Keir Starmer during the general election. But Sharkey has been left unimpressed by the bonus ban. He said: 'Driving forward eye-catching policies designed to do nothing more than grab headlines is no way to fix the biggest problem facing this country in the 21st century, the government has been outwitted and outmanoeuvred by the water companies.' Was the Thames package designed to circumvent the rules? Documents it released to the Efra committee show that when designing the payments package, the company hired top consultants and law firms including Rothschild & Co, Linklaters and Mercer to help it come up with a retention programme that was legally sound and would get past regulators. During Thames board meetings set up to discuss the bonuses, members asked 'if any pressure to waive bonus would be a risk generally or under the water (special measures) bill', according to the documents The board was told the bonuses were in line with the specifications of the legislation: 'The [remuneration] committee requested to reconfirm whether the MRP was consistent with the Water (Special Measures) Act and related Ofwat consultation and it was confirmed that the MRP was a retention payment rather than a bonus, and had no performance-related element. As such, it was not restricted by the Water (Special Measures) Act.' Sign up to Business Today Get set for the working day – we'll point you to all the business news and analysis you need every morning after newsletter promotion Thames Water and its lawyers and advisers believe they could pay its chief executive and chief financial officer under the scheme if they wanted, because they are retention payments. If this loophole remains open, any water company that breaches pollution rules could continue to pay out millions in bonuses to their executives, as long as the payments are not labelled performance related. In a letter to the Efra committee in July, Reed would not directly answer whether these bonuses would be banned. He said: 'Should Ofwat determine Thames Water have breached the performance-related payments rule, then I expect them to take appropriate enforcement action.' A Defra spokesperson followed up and said: 'It is for companies to follow these new rules and help rebuild trust with their customers.' Water companies can also get round the bonus ban by hiking the pay of executives to make up for the lack of compensation. The Guardian revealed this week that Southern Water has nearly doubled its chief executive Lawrence Gosden's annual pay package to £1.4m. Southern has already been allowed to increase average bills by 53% over the next five years and is appealing to the Competition and Markets Authority to charge more. Ofwat says it may bring forward a planned review of the bonus ban, currently set for 2027, to look at the scope of the rules and see whether the net needs to be widened. The regulator added that executive salaries were a matter for the water companies, but said it expected them to be appropriate when taking bonus bans and company performance into account. A Defra spokesperson said: 'Undeserved bonuses for water company bosses have now been banned as part of the government's plan to clean up our rivers, lakes and seas for good. Any instances of companies trying to circumvent the new rules are completely unacceptable. 'The government will leave no stone unturned against any bosses being made these outrageous payments.' Southern Water said the rise in its chief executive's salary was not an attempt to evade the bonus ban but part of a 'long-term incentive plan' as part of an effort to turnaround the company. It added that the payments were 'common industry practice'. A Thames Water spokesperson said: 'The company's CEO is not party to the MRP and has received no payments. None of the retention payments have been funded by customers. Full details of the plan have been shared with our economic regulator and the Efra committee.'
Telegraph
2 hours ago
- Telegraph
Forget Champagne – invest in these English wines for big returns
England's wine industry is ageing like a fine Sussex red. Tastings have proved that home-grown vintages punch well above their weight compared to established brands, and tours of English vineyards are attracting wine aficionados from across the world. Yet while the quality of reds and whites is improving rapidly, it's sparkling wine that's catching the eye of connoisseurs, as well as courageous investors. French Champagne houses are snapping up real estate in Kent, Sussex and Hampshire in an attempt to capitalise on the British wine boom. Pommery, Taittinger and the Cava behemoth Henkell Freixenet have all bought vineyards in southern England – as a warming climate pushes grape-growing northwards. As the industry has expanded, so too have the opportunities to make money from English wine as an investment. The market is still in its infancy, but with heightened risk comes opportunity. Here, Telegraph Money explains how to boost the odds of lucrative returns. The basics of wine investing Which English wines to invest in How to fit English wine into your portfolio Storing your wine Making investments tax-efficient The basics of wine investing The theory of wine investment is straightforward: you buy wine, store it and sell it later when its value has risen. The quality and scarcity of fine wine tends to appreciate over time, along with its price. Because wine is a physical, tangible asset, like property or gold, it typically performs well against inflation. The kicker is that wine can spoil if kept under the wrong conditions. Only some wines are good enough to make the cut. Less than 1pc of the wine produced around the world is considered 'investment grade' due to its quality, brand equity, limited supply, vintage appeal and ageing potential. Will Hargrove, of fine wine merchant Corney & Barrow, says investing in wine should never be done with a time horizon of less than five to 10 years. He says: 'You need to be able to weather the ups and downs of what goes on in the world. 'When you buy and store wine, you're going through a transition where the wine stops being available on the shelves to being available on the secondary market, hopefully at a higher price – although that's not always the case. 'Anyone investing in wine is relying on the consumer to be buying the wine and drinking it, because eventually the wine will go off.' Which English wines to invest in Because the investment market for English wines is still developing, there are no safe bets when it comes to choosing a vintage. Hargrove says: 'The quality [of English wine] is massively on the up, especially among sparkling, but there are some good whites too, and the odd red, starting to creep in. 'The problem, from the point of view of investing, is no one knows how these wines are going to age, so it's a very tricky thing to get right.' However, Gregory Swartberg, of wine merchant Cru Wine, says that investors shouldn't dismiss English sparkling. He adds: 'There are English sparkling wines that are investment grade quality today and more will become investment grade over time. 'But you have to be extremely selective. You can't shoot blind in a brand or vintage you believe is good.' Among the best investment-grade English wines, according to Matthew Small, of wine investment platform WineFi, are Nyetimber's 1086 Prestige Cuvée – at around £150 a bottle for the 2010 vintage – and Gusbourne's Fifty One Degrees North, whose 2016 vintage retails for £195. If you compare 1086's critic score against one of the most famous Champagnes – Dom Perignon – for the same 2010 vintage, Nyetimber scores 17.5 out of 20, compared to Dom Perignon's 18.5. While the quality may be similar, English producers are at a disadvantage for one simple reason: brand recognition. Small says: 'Brand is one of the biggest determinants of price, as with all luxury goods. With wine the main three factors are brand, critic's score and supply. 'Dom Perignon is a globally recognised brand, and has massive distribution channels, massive history in every global market. Nyetimber is trying to build that. 'If you're going to invest in English sparkling, you're basically making the play that their brand is going to increase over time. 'Then the question is: what is the life expectancy of these wines? Or what we call the 'drinking window'. How long have we got for Nyetimber to become a globally recognised brand and for the price to go up?' Nyetimber's 1086 is given a drinking window of around 10 years by wine ratings index Jancis Robinson. The relatively short timescale shows why investing in English sparkling is more of a gamble, according to Small. 'For riskier investments you want a longer drinking window to give an opportunity for the brand recognition to increase. 'I'm not saying it won't happen, but a 10-year drinking window isn't a huge amount of time for a brand to become massive.' Swartberg believes there is 'zero chance' of English still wines ever becoming investment-grade. 'There are too many regions in the world that are making very good [still] wines,' he starts. 'In the UK labour is expensive, it cannot compete with Spain or South Africa. 'It cannot compete with Prosecco or Cava as the cost is too high. But it's competing with Champagne straight away – the product is that good. 'Nyetimber is leading the pack – it's been making really good sparkling for a while. They have fantastic cuvée. 'Wiston Estate, Exton Park and Hembledon Wine Estate – we've seen some investment in these from outside the UK. 'Chapel Down and Sugrue are doing some very good stuff. The quality is there, but the investment market is waiting to ignite.' 'Champagne used to have our climate' Growing confidence in English viticulture means even smaller producers have high hopes of producing investment-grade vintages. In a tranquil corner of north-west Essex, pea-sized grapes hang on rows of rustling vines under the dry July sun. The gently sloping 40-acre plot is surrounded by fields of wheat and divided by swaying alder trees which act as windbreaks to protect the precious crop. 'You've got to be a nutcase to do what I did,' says Paul Edwards, as he surveys the neat lines he first planted in 2008 – a £1.5m gamble at a time when the English wine industry was still in its hobbyist infancy. 'The farmers around us used to say 'what the hell are you doing?'. But in the end, it turned out to be viable.' Saffron Grange is a boutique vineyard and English sparkling wine producer on the outskirts of the historic market town of Saffron Walden. Edwards picked this spot because of its distinctive climate, topography and soil – what the French call 'terroir'. The site sits on a chalk seam that runs all the way from the renowned wine-growing regions of northern France, up through Sussex and into East Anglia. The same clay-loam upper layer of soil allowed crocuses to be grown and farmed for their saffron in the late Middle Ages – making the town rich and inspiring its name. The vineyard's logo is a woolly mammoth, a creature that 200,000 years ago roamed over the land where Edwards and family now tend their vines. 'The climate we have in England is what Champagne used to have 30 years ago in its heyday,' says Nick Edwards, Paul's son. 'This is why our focus has been on sparkling – we wanted to do one thing and do it well.' Saffron Grange is a minnow in the market, producing around 25,000 bottles a year – for around £30 each – compared to between one and two million from the established English names like Nyetimber and Chapel Down. These in turn are dwarfed by the big Champagne houses, such as Moët & Chandon, which produces around 30 million bottles a year. But there are perks of being a small player. Each October, some 300 volunteers pick up clippers and harvest the vineyard's crop, which is then carted to the winery's stainless steel fermentation tanks, before being rewarded with a slap-up meal. This loyalty and pride in a small local business has kept costs down, and helped Edwards to turn a modest profit for the first time this year. Paul and Nick believe their award-winning 2018 Classic Cuvée – a vibrant blend with notes of candied apple and stone fruit – is a candidate to become investment-grade one day. Most of their wines are aged for two to three years, but they are holding back a small batch of the 2018 to see just how good it can get. 'We're focussing on producing the best we can on our land and building a reputation,' says Nick. 'We want to be seen as excellent quality sparkling wine that's affordable, that people want to drink and that can be relied on annually. 'But for a small volume of our wines, we want to see where we can get to in terms of quality.' How to fit English wine into your portfolio Because of the higher risks involved in buying English wine, the smart move is to balance out the investment with safer bets elsewhere. Small says: 'The two key questions for an investor are: what's your time horizon and what's your risk tolerance? 'Unless you have massive risk tolerance, English wine has a small percentage to play in that portfolio. 'You would probably want under 5pc invested in English sparkling. Invest by all means, but alongside other more established regions.' Bordeaux makes up around 40pc of the fine wine investment market, down from its near monopoly before 2012, but still the biggest share of a single region. Bordeaux traditionally has been the least volatile segment of the market –and also the most liquid. 'If someone wants low-risk wine, I would say they should go with Bordeaux. If they're more returns-focused I would say Champagne and Burgundy,' Small says. 'You can get these incredible spikes in certain regions. That's why it's important to have exposure to all the regions, including England, in a way that matches your risk tolerance. 'It's very difficult to know when a region's going to spike, but when it does, as long as you have some exposure to it you're going to take advantage.' When considering which wines to invest in, Small says Wine-Searcher is 'a great tool'. The website offers a comprehensive database of all wines on the market and is used by merchants and investment houses to sell their bottles. 'Wine-Searcher also has critic scores and drinking windows. You can easily flick between wines to see how they rank. 'It's basically a Google search for all wines. It's got all that information on there.' Storing your wine If you are buying bottles of wine as an investment, you could choose to store it yourself. But be warned – maintaining optimal conditions is essential to ensure the wine remains at the highest quality possible, and doesn't undermine your investment when you eventually come to sell. Small says: 'When you invest in wine you're effectively a custodian of the wine. You're storing it until it's in its perfect drinking window. Then someone will buy it who doesn't want to store it but just wants to drink the wine when it's at its best.' However, if you are serious about building a portfolio, experts agree that storing your vintages 'in bond' is the best option. Buying in bond means your wine investment is stored in a specialist warehouse approved by HMRC. Small says: 'If you're buying these very expensive wines, a thing we call 'provenance' is essential – that's the quality of the wine and how well it's been kept. 'When you store in bond you know it's been stored in perfect humidity, light and temperature conditions. 'If you have a very rare bottle of wine but it was stored in someone's cellar you have no idea how it's been kept. Then you can struggle to sell that on. Storing in bond means there's an audit trail. You know it's been kept and stored properly.' Wine can also be insured to its market value when stored in bond, reducing the financial risk if something goes wrong. The tax benefit of in-bond storage is one of the biggest draws. Wine buyers are usually hit with a double-whammy of alcohol duty and then 20pc VAT on top of the duty and the price of the bottle. But when wine is stored in bond you only have to pay tax on it when you take it out of storage, and if you decide to sell the wine while in bond, you will avoid paying duty or VAT altogether. What's more, if you choose to have your wine delivered at a later date, the VAT is payable on the wine's original sale price rather than its current market value. Prices typically range from between £10 to £15-a-year to store a 12-bottle case of wine. There are bonded warehouses dotted across the country. Some of the biggest names include Arc Wine Reserves in Cambridgeshire, Berry Bros & Rudd in Basingstoke, and Nexus Vinothèque in Wiltshire. Making investments tax-efficient If a bottle of wine has a life expectancy of under 50 years then HMRC classifies it as a 'wasting asset', which means it is exempt from capital gains tax when sold. Capital gains tax is tax owed on the profit from selling an asset that has appreciated in value. Small says: 'One of the main reasons to invest in fine wines in the UK is that it is capital gains tax-exempt. 'This is a massive plus, and makes wine a very good diversifier. It's not a substitute for a portfolio in equity and bonds, but it's good to have alongside as it trades on different fundamentals.' The HMRC definition of a wasting asset is 'an asset with a predictable life not exceeding 50 years at the time when it was acquired'. When assessing how long the wine's life expectancy is, its shelf life, the wine's provenance, condition and vintage will all be taken into account by the taxman. While port and a few fine wines are exceptions, the vast majority of wine falls into the wasting asset category, and will be exempt. If the wine is deemed not to be a wasting asset, a seller would still benefit from the capital gains tax allowance on profits up to £3,000.
Telegraph
2 hours ago
- Telegraph
British Gas boss warns Miliband against ‘outrageous' energy bill divide
Forcing households with gas boilers to pay higher green taxes than those with heat pumps would be an 'abomination', the boss of British Gas has warned. In a stark warning to Ed Miliband, Chris O'Shea said that removing net zero levies from electricity bills would punish the poor and amount to a 'terrible distortion of the market'. It comes amid reports that the Energy Secretary is considering stripping green levies from electricity in a bid to encourage the adoption of heat pumps. Instead, the costs would be moved on to gas, making a boiler more expensive to run. Mr O'Shea, the chief executive of British Gas owner Centrica, warned Mr Miliband to resist such an 'outrageous' overhaul and instead focus on protecting billpayers from the soaring cost of net zero. 'It's a preposterous idea,' Mr O'Shea told The Telegraph. 'The idea you'd put the levies on gas bills will mean those better-off people with heat pumps will be subsidised by those poorer people with gas boilers. That's nonsense. 'I think those of us with the broadest shoulders should help those of us who have the most need. 'To put them on gas bills would be an abomination, outrageous and a terrible distortion of the market. It would also be unfair because the people [who have] gas boilers the longest will also be those who can least afford to pay higher bills. 'I have heard the argument that it will encourage more people to use electricity. But encouraging people to use subsidised electricity by forcing gas users to pay just doesn't make any sense.' Mr O'Shea said the Government should shift the cost of green levies on to general taxation rather than creating an energy bill divide between households. 'Hostage to fortune' The Climate Change Committee, a Government quango, has urged Mr Miliband to remove the taxes from electricity bills to encourage more people to buy heat pumps and electric cars. However, experts have warned such a move risks increasing the average gas bill by £120 a year. Mr Miliband is considering the reforms as part of a radical rethink on clean power, as he fights to defend Britain's goal of reaching net zero by 2050. An announcement is expected this autumn. Mr O'Shea's plea to protect households with gas boilers came as he warned that Mr Miliband's net zero targets would be challenging. 'I don't think they are a work of fiction, and it's good that we have stretching targets,' he said. 'But even if you were to speak to those who helped to set them, then even they would say it will be difficult. But I don't think it's impossible.' The Centrica boss also cast doubt over Mr Miliband's pledge to cut household energy bills by 2030, supposedly aided by Britain's move to a greener economy. Mr O'Shea said he was sceptical that the Energy Secretary's promise to lower bills by £300 this parliament was 'achievable'. 'The energy transition is not cheap and it is not simple,' said Mr O'Shea. 'If it were, then we would have done it already. He urged the Government to take a more honest approach when it came to net zero. 'What renewables will do is give you more price stability,' he said. 'You will get fewer highs and fewer lows. Home-grown renewables give you more security than imported gas. 'But I wouldn't have made the £300 statement because it makes you a hostage to fortune.' As Britain's second-largest energy supplier behind rival Octopus, Centrica takes an 'agnostic' view when it comes to net zero, according to Mr O'Shea. That means the company is as comfortable building gas-fired power stations as it is investing in heat pumps. However, he said the business has abandoned wind and solar investments in the UK because they do not make enough money. Instead, Centrica is exploring wind investments in Ireland. Mr O'Shea was also critical of Mr Miliband's pledge to ban all new drilling in the North Sea, even though Centrica no longer conducts any exploration activity in the basin. 'I don't agree with the decision,' he said. 'If you take it from an environmental point of view, we import LNG [liquefied natural gas]. 'If you produce gas domestically, then it will have a lower carbon content than the LNG that we import. And the reason is the cost of shipping and the cost of turning the gas into a liquid.' Zonal pricing row By taking a less fiercely aggressive approach on net zero, Mr O'Shea has set himself apart from Greg Jackson, his counterpart at Octopus, who has made a virtue of being a clean-energy champion. This distinction came to the fore in recent months amid the fierce debate over zonal pricing. Unlike British Gas, Mr Jackson was a vocal supporter of plans to divide up the country into different energy pricing zones in an effort to incentivise developers to build wind and solar farms where demand – and prices – are highest. However, the proposals were highly controversial because they would have in practice meant higher bills in the South for electricity than in the North. 'It has been a very divisive debate,' said Mr O'Shea. 'We did not want a postcode lottery.' Mr Miliband recently abandoned the proposal, which British Gas believes was the right decision. Octopus disagrees and claims the Energy Secretary missed a vital opportunity to lower bills by billions of pounds. Mr O'Shea said: 'There was one very, very vocal proponent of it, and I think the benefits were all quite theoretical. 'For a company that purports to put the customer first, I don't know why they would want a system that would be more complex. I think they missed the point. 'I don't know why they went so hard on it and why they were so vicious about the Government's decision. One of their guys made a post on social media saying 'good game, well played'. This is not a game. People are struggling to pay their energy bills. 'I think that a lot of things have become too polarised. And energy is no different.' Rough decisions Now that the battle over zonal pricing is over, Centrica is turning its attention to Rough, the gas storage facility it runs 18 miles off the coast of East Yorkshire. It accounts for about half of the capacity the UK has to store gas. However, Mr O'Shea has warned that Rough risks closure by the end of the year unless ministers agree to help fund the site's redevelopment. 'Rough is going to lose about £100m this year and we can't sustain that,' he said. 'I think we have probably got to see something by the end of this year. 'If we get towards the end of the year and we've got a situation whereby we've got no prospect of making a profit, then we're just throwing good money after bad. It would be like a charitable donation, and that's not our business.' Rather than securing a handout, Centrica has asked ministers for a so-called cap and floor mechanism to help transform the 40-year-old site to store hydrogen as well as natural gas. This would provide a guaranteed minimum revenue level for the project - the floor – as well as limited excessive profits – the cap. Centrica has already stopped filling the facility amid mounting losses. Mr O'Shea said a full closure would involve the loss of hundreds of jobs. As well as impacting the local community, such a move threatens to deal a hammer blow to Britain's energy security, just years after the country recovered from one of its worst-ever energy crises following Russia's invasion of Ukraine, Worse still, it also sends the wrong message to our allies in Europe, according to Mr O'Shea. 'If Rough closes, then the UK has just six days of gas storage available, compared to 100 in France, Netherlands and Germany. 'If we get into a crisis and the UK hasn't invested in gas storage, then I am not sure it will flow from the Continent. 'Politically, if you're the prime minister of France or Germany and you look at a country that hasn't invested in gas storage, then I am not sure that will work. There is a need for us to recognise the risk that no one likes a freeloader.'
