Blackout in the Peninsula: No Expected Credit Implications for Iberian and European Utilities or Power Generators

A strong oscillation caused the Spanish electricity grid to lose 15 gigawatts of generated power, causing a blackout across Spain and Portugal. This commentary looks at the Iberian blackout, and its credit implications.

Key highlights include the following:

-- Morningstar DBRS does not expect this blackout event to have a material credit impact on European electric transmission, distribution, or power companies.
-- This event brings the ancillary services to grid stability to the forefront, including frequency regulation and black starts.
-- Once a cause is determined, it could lead to undertaking new projects to increase grid reliability.

"We expect that these investigations will identify capital necessary upgrades required to improve grid reliability, which will lead to electricity system operators approving more projects to enhance grid reliability", said Adam Provencher, Vice President of European Corporate Ratings, Diversified Industries, and Energy at Morningstar DBRS. "While efforts to improve grid stability will likely provide an opportunity for electricity transmission and distribution operators to increase their rate bases, we believe the benefits will be small compared to their overall needed investment."