Spain - Commercial Guide
Energy

This is a best prospect industry sector for this country. Includes a market overview and trade data.

Last published date: 2020-08-07

Overview

The Spanish electricity system switched towards a sustainable energy model in 2019 reaching a turning point towards renewable energy. Green energy reached 52 percent and, for the first time, exceeded the other generation technologies in the Spanish Peninsula, with the integration of an additional 6,528 MW new renewable generation. The Spanish electricity system closed 2019 with an all-time high of 104.8 GW worth of generation capacity. Wind power was the number one technology in installed capacity - ahead even of combined cycle - with a total generation capacity of 25,255 MW. At the end of 2019, the overall installed renewable energy capacity totaled 54,457 MW, of which 46 percent is wind, 16 percent is photovoltaic, and the remaining 38 percent corresponds to other renewable technologies. Power generation increased capacity by 6.2 percent compared to 2018, mainly due to the rise of 13.6 percent in the country’s installed renewable generation capacity. Solar photovoltaic, which closed the year with 8,623 MW of installed power capacity, was the technology that grew its capacity the most in 2019 - 93.2 percent increase (4,159 MW) - compared to the previous year.

Solar PV additions nearly doubled in Europe in 2019, reaching 17 GW compared to just 10 GW installed in 2018.  This is the highest level achieved since 2012 when many countries began to remove high feed-in tariffs for utility-scale PV. In Spain, the strong growth in 2019 was driven by a combination of increasing economic attractiveness of distributed PV under net-metering and self-consumption policies, and utility-scale projects awarded under the new auction schemes. Almost half of Europe’s utility-scale additions came from one auction in Spain held in 2017. PV additions may decline in 2020 as a result of several trends: i) exceptionally high growth in 2019; ii) uncertainty relating to policy transitions (particularly in Germany and Spain); iii) lockdown-induced construction delays; and iv) the economic impact of the pandemic on the business case of unsubsidized utility projects and distributed PV. Nonetheless, capacity additions are expected to rebound in 2021. Overall, the EU is forecast to add 25 GW over 2020-21, led by Spain, Germany, and France, representing 18% less than the October 2019 PV forecast.

The electricity generation mix has shown in 2019 that Spain is strongly committed to renewable energy, and it is also making progress in the process of decarbonization. Spain recorded in 2019 the lowest share of coal-fired technology ever, representing just 4.3 percent of the total generation compared to 14.1 percent in 2018. In addition, the year closed with an unprecedented event in the history of the peninsular electricity system: the so-called 'zero' carbon or, what equates to a several days without generating a single MWh using coal in December 2020. One of the main consequences of this boost to decarbonization has been the decrease in CO2 emissions associated with electricity generation, which have registered an all-time low since 1990: 40.6 million tons of CO2, 25.5 percent less than in 2018. On the other hand, the demand for electricity on the peninsula during the year stood at 249,144 GWh, slightly lower than in 2018 (2.7 percent) compared to the previous year. In addition to moving towards full decarbonization and in order to comply with European regulations on industrial emissions, Spain shut down eight of its 15 unprofitable and highly polluting coal-fired power stations on June 30, 2020. This closure comes 18 months after Spain closed its last coal mines.

Leading Sub-Sectors

The Spanish government submitted to the EU in April 2020 its Strategic Energy and Climate Framework, which includes the National Integrated Energy and Climate Plan 2021-2030, the Draft Bill on Climate Change and Energy Transition, and the Just Transition Strategy. The document proposes a reduction of between 20 to 21 percent of greenhouse gas emissions compared to 1990 levels. It plans to achieve up to 42 percent consumption of renewable energies out of the total energy use and 74 percent of electricity generation from renewables by the year 2030. By reaching these targets, Spain’s energy efficiency will improve by 39.6 percent by 2030. Regarding energy efficiency, the 2030 primary energy consumption target represents a 39.6 percent reduction. On energy security, it sets the ambitious objective of reducing energy dependency to 59 percent by 2030, having had an import dependency of 74 percent in 2017. It is phasing out coal for energy and closing some of its nuclear energy capacity by 2030. With respect to the improved functioning of the internal energy market, the draft plan includes policies to improve gas market integration and consumer protection. An increase of the interconnection level will be pivotal to improve the integration of Spain and the Iberian Peninsula into the Energy Union. Spain aims for an interconnection level of 15 percent in 2030. The current level (6 percent) is still well below although the ongoing Project of Common Interest (PCI) in the Bay of Biscay will almost double the interconnection capacity between Spain and France. Regarding investment needs, the draft plan quantifies a total of USD 264 billion, in the period 2021-2030, annually around 2 percent of GDP, of which only 20 percent would come from public sources.

Other top energy market sectors for U.S. businesses include natural gas, energy efficiency, and smart grid developments. Spain has no domestic production of liquid fuels or natural gas. Thus, there are government regulations that support Spain’s oil and gas imports from multiple countries which diversifies their suppliers.

LNG imports are projected to grow in Europe as new suppliers – notably the United States – increase their presence in international markets and more European countries build LNG regasification capacity. However, import dependence is only one part of the gas security equation. Other issues that may, in the long run, have an even greater impact on gas security in the European Union: how easily gas can flow within the European Union itself, how patterns of demand might change in the future and what role gas infrastructure might play in a decarbonizing the energy system. Spain’s gas imports hit an 11-year high 37.3bcm for 2019, up 7percent on the back of increased LNG volumes from the U.S., Qatar and Russia. Spain’s gas imports from the US at 1.8bcm were higher than traditional top supplier Algeria (1.76bcm) for the first time ever on a quarterly basis in Q1 2020. Spain regasification capacity counts for 40 percent of the total LNG regasification capacity in the EU.

Opportunities

Spanish renewable energy firms are extremely active worldwide. In the renewable sector, self-production/consumption has proven to be a promising prospect. Opportunities exist for U.S. firms to partner with Spanish firms 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 as it tries to move beyond past policy mistakes that led to widespread losses and lawsuits, to draw up plans to expand renewable power generation, to modernize its transport system and to refit buildings to make them more energy efficient through 2030. Energy efficiency is a sub-sector that shows growth prospects. Spain is one of the European countries with the highest index of energy consumption based on GDP. Electricity prices are high which leaves significant business opportunities for companies that offer energy efficiency solutions. Spain’s decarbonization efforts between 2016 and 2050 will require investments valued at between USD 390 – 455 billion.  The Spanish government estimates that implementing the carbon-reduction plans would require USD 224 billion of total investment in the next decade, USD 53 billion of which would come from the public sector. Spain plays an important role in smart city development throughout Europe as one of the 31-member countries of the European Innovation Partnership for Smart Cities and Communities.

The Partnership combines energy management, information and communications management, and transportation management to come up with innovative. It seeks to reduce high energy consumption, greenhouse gas emissions, poor air quality, and road congestion.

Stakeholders

The Ministry for Ecological Transition (MINET) is responsible, at 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, and when they are offshore in the territorial sea. Autonomous Regions, 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 MINET. 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, SA (REE) 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, for ensuring proper coordination between generators and the transport and distribution networks, and for 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, although subject to a high degree of regulation, all operators are private (except for the 20 percent stake held by the state in REE). The 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, and trade groups such as Aelec (former UNESA, Spanish Electrical Industry Association) that groups the largest utilities in Spain. 

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

Tel: +34 91 308 1542
e-mail:
carmen.adrada@trade.gov