Overview
As per Red Eléctrica —the sole transmission agent and operator (TSO) of the national electricity system in Spain, electricity demand showed a recovery in 2021, growing by 2.5 percent compared to 2020, reaching 256,387 GWh. Renewable technologies produced almost half (46.7 percent) of all electricity generated in Spain in 2021, recording their highest share in the generation mix. From the different renewable sources, wind energy represented 23.3 percent of the total electricity production, now the leading source of energy in Spain’s generation mix. Additionally, generation coming from technologies which produce zero CO2 equivalent emissions also set a record and closed 2021 with a share of 68.2 percent of overall electricity production nationwide. Solar photovoltaic was the technology that grew the most in 2021, closing the year with a growth of 36.7 percent and registering its annual all-time high in terms of production and contribution to the country’s generation mix with a share of eight percent of the total. Coal-fired generation registered its lowest value ever and closed the year with an all-time low in the national generation mix (a 1.9 percent share of the total). Installed power capacity stood at 112,846 MW, of which 56.6 percent belonged to renewable energy technologies.
|
Nuclear |
6.6 percent |
|---|---|
|
Wind |
25.7 percent |
|
Hydro |
15.9 percent |
|
Solar (PV & Thermal) |
15.8 percent |
|
Combined Cycle |
22.8 percent |
|
Cogeneration |
5.2 percent |
|
Coal |
3.3 percent |
|
Other |
4.6 percent |
Source: Red Eléctrica
Ernst & Young’s biannual Renewable Energy Country Attractiveness Index (RECAI) issued in 2022 shows Spain as the 9th most attractive market for renewable energy investment. Spain is also at the top of power purchase agreements (PPA) index as per the same source, together with the United States and followed by Germany and the UK, which improved their positions, and Australia, which remained fifth. The PPA market is experiencing continued growth due to high power prices and new corporate ambitions, although growth is slowing due to supply chain delays and permission and grid connection challenges. As a result, there is a shortage of ready-to-build projects, which along with greater demand for PPAs and increasing equipment costs, has pushed up PPA prices.
The estimated compound annual growth rate (CAGR) of Spain’s power market is expected to increase more than 6 percent between 2020 and – 2026. Energy prices have climbed to historic highs as the war in Ukraine continues and fears of supply disruptions tightened the market already struggling with the effects of COVID-19. The current crisis is accelerating the energy transition to achieve energy self-sufficiency and decarbonize the economy.
Spain’s role in addressing the European energy crisis is attracting attention in Europe. Spain is largely independent of Russian hydrocarbons: according to figures from the Spanish Corporation of Strategic Reserves of Oil Products (Cores) for January 2022, Russian-sourced hydrocarbons made up just two and six percent of Spain’s oil and gas imports, respectively. Since mid-2021, Spain has halved its imports, making a significant contribution to diversification in Europe. The decommissioning of coal power plants and their replacement by gas, alongside contributions from nuclear and renewable energy are also among the country’s contributions to mitigating climate and geopolitical risk.
Spain ranks number six among the 10 countries that account for almost 80 percent of all renewable capacity growth over the period 2021-2026 in the world, after China (which alone provides almost 45 percent of all renewables expansion), United States, India, Germany, Japan, and Brazil. Europe’s renewable capacity is forecast to expand by 45 percent per the International Energy Agency’s (IEA) analysis and forecast for 2026, with the addition of 300 GW, led by solar PV and wind. Three-quarters of the growth is from seven countries: Germany, Spain, France, the Netherlands, Turkey, the United Kingdom, and Poland. Renewable electricity capacity in Spain is expected to expand by five percent between 2021-2026 from the addition of 34 GW as per IEA’s report on renewables, almost entirely from solar PV and wind. Overall, the IEA forecast is 27 percent higher than last year due to the allocation of EU stimulus funds to incentivize distributed PV and higher than expected wind capacity awarded in the second round of auctions, held in October 2021. Only 1.5 GW was earmarked for onshore wind in the second round; however, 2.3 GW was awarded to compensate for unallocated capacity in other categories that were undersubscribed. To free up capacity for new projects, the government introduced regulations last year stipulating permits would expire if certain project development milestones are not met. Spain’s onshore wind and utility-scale solar PV forecast is also driven by a pipeline of projects outside the auction process, with revenues from corporate PPAs and the wholesale market.
Government-held auctions remain a critical policy driver of utility-scale growth in most markets. An increasing proportion of the growth is expected to come from corporate PPAs due to the competitiveness of wind and solar PV with wholesale electricity prices and the private sector’s sustainability goals. Spain has made considerable progress to date on increasing the share of renewables in the electricity sector. In Spain’s decentralized government system, regional administrations have considerable authority over energy policy development and implementation. Effective coordination between the central and regional governments is critical for a successful enactment of energy strategies in Spain.
Leading Sub-Sectors
Renewable Energy (Offshore wind and PV solar self-production and self-consumption in particular)
In 2022, Spain allocated 40 percent of European funds to industry, energy, research, development, and innovation (RD&I), and digitization. Almost 20 percent of the Next Generation Funds USD 28 billion which are already integrated in Spain’s 2022 State budget, will go to industry and energy sectors.
The Climate Change and Energy Transition Bill places the fight against climate change and the need for an energy transition at the center of the economy and society. The bill’s main targets, like those of Spain’s Energy and Climate Integrated National Plan (ECINP), include achieving at least 70 percent of renewables in electricity by 2030 and 100 percent by 2050, at least 35 percent renewables in final energy consumption by 2030, and to reduce primary energy consumption by at least 35 percent.
Energy Storage and Efficiency
Energy efficiency is a sub-sector that shows growth prospects. Electricity prices are very high, which leaves significant business opportunities for companies that offer energy efficiency solutions. Energy storage technology also has countless opportunities in this market, given the importance of renewable energy and Spanish plans for electrification.
Energy storage is vital for Spain to make renewable energy a real viable independent energy source, helping to reduce or even almost eliminating the need of back-up systems. Demand for this type of technology is huge in Spain as renewable energy has become the most important energy source produced locally. Being able to rely on renewable sources due to storage technology would highly reduce Spain’s dependency on foreign imported resources and help to achieve the emission reduction targets. Energy efficiency is directly related to emissions reduction and climate change prevention.
The transportation, industrial, and construction sectors have made significant efforts to meet Spain’s targets for reducing emissions and increasing the share of renewables in their energy mix. A vast transformation is expected once all the country’s plans and strategies are implemented, when fossil fuels are no longer dominant, and end-user sectors are mostly electrified. Such a transformation will bring new challenges in the form of energy security, as fluctuating renewable generation will require new forms of back-up and flexibility. The changes will also bring opportunities, particularly in areas such as energy system integration. Spain’s overall energy strategy employs an “efficiency first” principle. In all sectors, Spain’s energy transition objectives hinge heavily on reducing consumption.
LNG & Green Hydrogen
Spain is pushing for a better interconnection with Europe to take advantage of the relatively secure position of this market, which has a high penetration of LNG but currently lacks the infrastructure to shift significant volumes of imported gas to Northern Europe.
There are large projects already in place to produce green hydrogen for industry and large transportation, i.e., large vessels. Spain has the ideal conditions to become Europe’s green hydrogen hub according to industry analysts, with high levels of public and private sector investment in facilities under the country’s USD 70 billion COVID-19 recovery plan and strong supplies of renewable energy and existing gas infrastructure. Spain’s Hydrogen Roadmap approved in 2021 reinforces Spanish government’s commitment to cutting emissions and is consistent with the country’s Long-Term Decarbonization Plan also approved last year, which aims to reduce greenhouse gas emissions by 90 percent in 2050 compared to 1990 levels. Unlike the EU Hydrogen Strategy approved in July 2021, Spain’s plan excludes the role low-carbon hydrogen could play towards boosting hydrogen production. The €8.9 billion Hydrogen Roadmap is part of the government’s plan to reach carbon neutrality by 2050. Spain is promoting green hydrogen in trucking, shipping, aviation, and heavy industry and aims to install four GW of renewable hydrogen electrolyzers by 2030, representing 10 percent of the European Union’s 40 GW target. Spain’s overall strategy, which aims to reduce greenhouse gas emissions by 4.6 million tons of CO2 equivalent in the next ten years, aims to develop hydrogen clusters by linking renewable hydrogen production directly to industrial end users and mobility projects. The government plans to review the roadmap every three years.
Opportunities
Spain’s investment in energy, climate, and transportation research and innovation will increase considerably in the coming years. The ECINP identified an investment need of USD 288.5 billion (241.4 billion euros) through 2030 (pre-COVID) to meet mid-term climate goals, out of which only 20 percent will be public sector investments. Spain’s Next Generation EU (NGEU) funds will bring additional investments. It is expected that Spain’s green hydrogen roadmap investment will reach almost USD 11 billion. Renewable hydrogen will be key for Spain’s decarbonization plans and to increase renewable electricity and gases. The country’s target is to install four gigawatts of hydrogen electrolysis capacity by 2030. The Spanish State Secretary for Energy recently confirmed that Spain will allocate USD 1.8 billion of Next Generation EU funds by 2023 to promote green hydrogen development, consistent with Spain’s green hydrogen roadmap approved October 2020. This funding aims to promote green hydrogen in trucking, shipping, aviation, and heavy industry, and the installation of four gigawatts of renewable hydrogen electrolyzers by 2030.
It is important to note that Spain’s plans to recover from the COVID-19-induced economic crisis and European energy crisis from Russia’s war in Ukraine presents a major opportunity to frontload its planned investments in clean energy transition over the upcoming two years. The leading sub-sectors section presented earlier highlights areas for U.S. exporters to find specific opportunities in the Spanish energy sector for 2022 and beyond.
Spanish renewable energy firms are extremely active worldwide. Opportunities exist for U.S. firms to partner with Spanish companies in projects in Europe, Latin America, the Middle East, and Africa. Joint ventures and partnerships will play an important role in capturing market share and in injecting necessary capital and state-of-the-art technology in these regions. The Spanish government is exploring ways to persuade the private sector to invest USD 118 billion for the transformation of its energy system to expand renewable power generation, modernize its transport system, and refit buildings to make them more energy efficient through 2030.
Resources
Stakeholders:
- The Ministry for Ecological Transition (MITECO) is responsible, at the state level, for: proposing and executing government policies in relation to energy; adopting the necessary measures to secure the supply of electricity and the economic and financial sustainability of the electric system; granting the relevant authorizations for facilities with an installed capacity of more than 50MW when they affect the territorial scope of more than one autonomous community or are offshore in the territorial sea. Autonomous communities, or regional governments, are in charge of developing basic state-level legislation. They also grant the necessary authorizations when the electric infrastructure solely affects their territory unless such authorizations are expressly reserved for the MITECO. At the municipal level, town councils oversee granting the necessary works and activity licenses for the installation of the facilities.
- The National Commission for Markets and Competition (CNMC) is the independent regulator in charge of supervising and controlling the proper functioning of the electricity sector. It also oversees the degree and effectiveness of market openness and competition in both the wholesale and retail markets.
- Red Eléctrica is a company partially owned by the State (20 percent) and the sole transmission agent and system operator (TSO) for the Spanish electricity system. Among other duties, it is responsible for guaranteeing the continuity and security of the electricity supply, ensuring proper coordination between generators and the transport and distribution networks, and operating and managing the transmission grid.
- OMI-Polo Español SA (OMIE) is the electricity market operator. It manages the wholesale electricity market for the Iberian Peninsula (Spain and Portugal) where market agents trade the amounts they need (MWh) at transparent prices. In addition, the Iberian Energy Market Operator (OMIP) (Portuguese Division), SGMR, SA manages the futures market (forward and derivatives) on the Iberian Peninsula. OMIE belongs to the Iberian Market Operator business group.
- In the liberalized market context of the energy sector, all operators are private (except for the 20 percent stake held by the state in REE) although subject to a high degree of regulation. The National Commission of Markets and Competition (CNMC) publishes an annual list of the principal operators in the energy market, that is those that hold one of the five largest shares of the market or sector in question. The dominant operators, those whose market share exceeds 10 percent, continue to be Endesa, Iberdrola, EDP, and Naturgy. In the case of gas, Naturgy remains the main market operator, followed by Endesa, Iberdrola, and Cepsa Gas. The main operators in the fuel sector are Repsol, Cepsa, BP, Galp and Disa. In liquefied petroleum gases (butane and propane), the leaders are Repsol, Cepsa, BP, Naturgy and Disa. In natural gas, there are only two dominant operators, whose market shares exceed 10 percent which are Naturgy and Endesa. Repsol and Cepsa are the dominant operators in the sectors of fuels and liquefied petroleum gases.
The stakeholders in the energy sector in the evolution of Spain’s energy include:
- The public sector, Institute for Diversification and Energy Saving (IDAE) at State level;
- Trade organizations such as Aelec (former UNESA, Spanish Electrical Industry Association) that unifies the largest utilities in Spain;
- ENERCLUB, Spanish Energy Club, private, non-profit entity for a better understanding of the different issues related to energy by the different social partners, nationally and internationally.
In renewable energy, the main trade associations include:
- APPA, Renewable Energy Companies Association.
- UNEF, Photovoltaic Energy Companies Association.
- AEE, Spanish Wind Energy Association.
U.S. Commercial Service Spain
Sector Specialist: Carmen Adrada
Tel: +34 91 308 1542
e-mail: carmen.adrada@trade.gov
Installed power capacity on the Iberian Peninsula as of 31 December 2021:Installed power capacity on the Iberian Peninsula as of 31 December 2021:This is a best prospect industry sector for Spain, including a market overview and trade data.