Spain - Country Commercial Guide
Energy
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Overview

Spain’s total installed energy capacity increased by 4.9% in 2022, reaching 119 GW. This increase was driven by renewable energy, which saw a 9.1% increase in installed capacity across the Iberian Peninsula (including Portugal).

Within renewable capacity, photovoltaic (PV) energy saw the greatest increase in 2022, growing over 22% (4.4 GW). This makes PV the third leading generation capacity after wind and combined cycle. Wind also made gains in 2022, adding 4.9% capacity. In contrast, non-renewable power fell by 0.8%, mainly due to an 8.5% decrease in coal and the decommissioning of a major coal plant. By the end of the year, non-renewable capacity made up only 2.8% of the Iberian Peninsula’s total generation capacity.

The “non-peninsular” systems, comprised mostly of the Balearic Islands (Mallorca and Ibiza) and the Canary Islands, saw similar trends. These areas increase installed capacity by 2.2% in 2022, led by a 31.4% increase in solar PV and 2.4% increase in wind.

Installed power capacity on the Iberian Peninsula as of December 31, 2022:

  • Wind: 29,994 MW
  • Combined cycle: 26,250 MW
  • Solar PV: 19,785 MW
  • Hydro: 17,094 MW
  • Nuclear: 7,117 MW
  • Cogeneration: 5,643 MW
  • Coal: 3,464 MW
  • Pumped storage: 3,331 MW
  • Fuel and gas: 2,408 MW
  • Solar Thermal: 2,304 MW
  • Other renewables: 1,093 MW
  • Non-renewable waste: 426 MW
  • Renewable waste: 170 MW
  • Hydro-wind: 11 MW
  • Total Renewable: 70,452 MW
  • Total Non-renewable: 48,639 MW
  • Total: 119,091 MW

Source: Red Electrica

Electricity demand for Spain’s energy-heavy industries (e.g., steel, chemical, paper, and food) decreased by 7.7% in the first quarter of 2023. The most apparent reason being a sharp reduction in hydraulic production due to a prolonged and significant drought affecting Spain. Climate change is expected to increase the prospect of drought in Spain. Regionally, there have been stronger than usual energy exports due to Spain’s energy partnership with France, which experienced a reduction in its available nuclear capacity.

Spain is the 8th most attractive market for renewable energy investment as per EY’s biannual Renewable Energy Country Attractiveness Index (RECAI) published in June 2023. Spain is also at the top of power purchase agreements (PPA) index, behind Germany, the United Sates, UK, France, and Australia.

The estimated compound annual growth rate (CAGR) of Spain’s power market is expected to increase more than 2.8% between 2023 and 2028. Energy prices climbed to historic highs after Russia’s invasion of Ukraine and fears of supply disruptions tightened the market already struggling with the effects of COVID-19. This crisis accelerated the energy transition to achieve energy self-sufficiency and decarbonize the economy.

Natural gas exports increased 24.6% compared to May 2022 and stand at 9,683 GWh, of which 75.7% are exported through gas pipeline and the remaining 24.3% as LNG. In 2022, the LNG imported from the U.S. accounted for 29% of the total natural gas imports volume followed by Algeria accounting for almost 25% through the Mediterranean pipeline. Other countries exporting LNG to Spain include Nigeria, Norway, Russia, and Qatar.

Spain’s long-term goal is to decarbonize its economy by 2050 with a 100% renewable electricity system. This implies reducing CO2 emissions from 334 million metric ton equivalent (MT) emitted in 2018 to a maximum of 29 MT in 2050. The country’s long-term climate strategy is backed by a 2021 Climate Change and Energy Transition law (PDF), which prohibits new hydrocarbon exploration and extraction projects, and a Just Transition Strategy (PDF), Spain’s roadmap to shut down thermal power while protecting coal miners and power plant workers.

To increase stability and flexibility in its network as it decarbonizes its energy sector, Spain announced an Energy Storage Strategy (PDF) (March 2022) aimed at developing 20 GW of storage capacity by 2030 and 30 GW by 2050. In 2021, Spain announced plans to invest a total of $4.6 billion (€4.3 billion) by 2023 to accelerate the production of electric vehicles and expected to attract an additional $21.2 billion (€19.7 billion) from the private sector.

Europe’s renewable capacity is forecast to expand by 45% per the International Energy Agency’s (IEA) analysis for the 2022-2027 period. At the EU level, the European Commission’s REPowerEU plan, released in May 2022, proposes ending the EU’s reliance on Russian fossil fuels by 2027. Among other goals, the plan aims to increase the share of renewables in final energy consumption to 45% by 2030, exceeding the 40% previously under negotiation.

Europe’s planned renewable electricity expansion doubles over the 2022-2027 period as energy security concerns add to climate ambitions. The EU’s forecast for growth has been revised upward significantly (by 30%) from last year’s goal, led by Germany (50% higher) and Spain (60% higher). Spain has streamlined permitting for solar PV and wind plants, and increased grid capacity for new renewable energy projects.

Government auctions are key to renewable energy growth in Spain. Corporations are expected to further drive this growth through PPAs due to the competitiveness of wind and solar energy. While Spain has made progress in increasing renewable energy, coordination between the central government and the regions remains is essential for the successful implementation of energy strategies.

Leading Sub-Sectors

Renewable Energy (Offshore wind and PV self-production and self-consumption)

Spain is the European country with the third highest renewable energy generation capacity and 11th lowest CO2 emissions per inhabitant. Globally, Spain is the 14th most sustainable country. The European Commission has positively evaluated Spain’s revised National Recovery and Resilience Plan, a plan which includes a section dedicated to REPowerEU. Valued at nearly $178 billion (€165.5 billion), the Spanish plan encompasses numerous reforms and investments aimed at contributing to Europe’s energy independence from Russian fossil fuels before 2030. Spain’s REPowerEU chapter emphasizes diversification away from fossil fuels through faster renewable energy deployment, industry decarbonization, and cybersecurity enhancement. In October 2023, 40% of funds ($4.58 billion/€4.26 billion) were allocated to climate-related objectives, including renewable energy, renewable hydrogen implementation, and energy storage, with significant financial support for these sectors.

Energy Storage and Efficiency

Energy storage is vital for Spain to make renewable energy a viable independent energy source, helping to reduce or nearly eliminate the need of alternative source 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. The ability to rely on renewable sources due to storage technology would greatly reduce Spain’s dependency on foreign imported resources and help to achieve the emission reduction targets.

Energy efficiency is a sub-sector that shows growth prospects. Electricity prices are very high, which creates significant business opportunities for companies that offer energy efficiency solutions. Energy storage technology also has countless opportunities in this market, given the Spanish plans for renewable energy-based electrification.

Transportation, construction, and industrial sectors made most important efforts to meet Spain’s emissions targets and increase renewable energy use. The increase of renewable energy generation and the disappearance of most fossil fuels with a more electrified market will bring about challenges in energy security and the need of renewable energy fluctuation solutions, providing opportunities in the system integration. The country’s energy transition objectives, with its “efficiency first” principle, will strongly depend on consumption reduction.

Green Hydrogen                                                                

There are large projects already in place to produce green hydrogen for industry and transportation (e.g., large vessels). According to industry analysts, Spain has the ideal conditions to become Europe’s green hydrogen hub with high levels of public and private sector investment in facilities under the country’s $70 billion (€65.1 billion) COVID-19 recovery plan and strong supplies of renewable energy and existing gas infrastructure. Spain’s Hydrogen Roadmap, approved in 2021, reinforces the Spanish government’s commitment to cutting emissions and is consistent with the country’s Long-Term Decarbonization Plan, which aims to reduce greenhouse gas emissions by 90% in 2050 compared to 1990 levels. Unlike the EU Hydrogen Strategy approved in July 2021, Spain’s Hydrogen Roadmap excludes the role low-carbon hydrogen could play towards boosting hydrogen production. The $9.6 billion (€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 4GW of renewable hydrogen electrolyzers by 2030, representing 10% 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 Emergency Capital Investment Program (ECINP) identified an investment need of $263.5 billion (€245 billion) through 2030 (pre-COVID) to meet mid-term climate goals, of which only 20% will be public sector investments. Spain’s NextGenerationEU (NGEU) funds will bring additional institutional investments. It is expected that Spain’s green hydrogen roadmap investment will reach almost $11 billion (€10.3 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 11GWof hydrogen electrolysis capacity by 2030. Spain is launching a significant investment of $19.5 billion (€18.1 billion) to produce and distribute hydrogen derived from renewable energy sources. This initiative marks Europe’s most ambitious endeavor to adopt crucial technologies aimed at achieving the continent’s goal of becoming the world’s first climate-neutral region.

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 $118 billion (€110 billion) for the transformation of its own 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 for proposing and executing government policies in relation to energy: adopting the necessary measures to secure the supply of electricity, managing the economic and financial sustainability of the electric system, and 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, develop 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 de España (REE) is a company partially owned by the government and is 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, S.A. 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% stake held by the state in REE) although subject to a high degree of regulation. The National Commission of Markets and Competition (Comisión Nacional de los Mercados y la Competencia - CNMC) publishes an annual list of the principal operators in the energy market (i.e., those that hold one of the five largest shares of the market or sector). The dominant operators, those whose market share exceeds 10%, include 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%, which are Naturgy and Endesa. Repsol and Cepsa are the dominant operators in the sectors of fuels and liquefied petroleum gases.
  • The Institute for Diversification and Energy Saving (IDAE) works under the Ministry of Ecological Transition’s Secretary of State of Energy. It provides promotional and training activities, technical consulting, development of specific programs, and financing of technical projects that increase energy efficiency, renewable energy deployment, and low carbon technologies.
  • Asociación de Empresas de Energía Eléctrica (aelec) is an industry group focused on the electricity value chain.
  • El Club Español de la Energía (ENERCLUB) is a private, non-profit entity for a better understanding of the different issues related to energy composed of social, national and international partners.

 

In renewable energy, the main trade associations include:

  • Renewable Energy Companies Association (APPA)
  • PV Energy Companies Association (UNEF)
  • Spanish Wind Energy Association (AEE)

 

U.S. Commercial Service Spain
Energy Sector Specialist: Carmen Adrada

Tel: (+34) 913 081 542
e-mail: carmen.adrada@trade.gov