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"Death from success" is a much-coined phrase nowadays that describes situations in which business success generates such a demand that it overwhelms a company's capacity to respond and so it ends up collapsing. This is the situation that many renewable energy companies and projects in Spain are experiencing. The irony is that they are partly responsible for this crisis.
In the last ten years Spain, according to data from the International Renewable Energy Agency (Irena), has doubled its renewable generation capacity from 47,740 MW in 2015 to 88,498 MW in 2024. Of these, eight out of ten are produced by wind turbines and solar panels. In the last year alone renewable energy generation increased by 13% compared to 2023 and, for the second year in a row, renewable production exceeded non-renewable output. This has led to a fall in emissions from the sector and a plummeting electricity price - two seemingly positive pieces of news that are, however, starting to backfire on the sector itself.
In 2023 Spain experienced an unprecedented situation of negative prices in the electricity market. An anomaly that has begun to recur frequently. In a single day, prices can vary by up to 2,000%. "This generates some benefits for the consumer, but it is also a warning sign about the sustainability of investors' income and future investments," was the warning from the International Energy Agency (IEA) in its 2024 report on world energy investment, although the sector has yet to detect any, truly clear, signs of weakness. "In terms of installed capacity on the ground, we are continuing on the same path as last year," said José Donoso, general manager of the Spanish photovoltaic union (Unef, a national trade association for photovoltaic companies). However, data from Red Eléctrica Española (REE - Spain's public-private national grid), to which SUR has had access, do show signs of a slowdown in recent months.
For example, the number of wind projects in service has not increased. "The right pace [of rollout] has not been reached," said Juan Virgilio Márquez, general director of the Spanish wind energy association (AEE). Meanwhile, the number of applications is gradually decreasing. In the case of photovoltaic energy, something similar is happening. "Investors also need certainty, especially in a scenario of price volatility like the current one," added Donoso.
On 7 April the price of electricity on the wholesale market was 0 euros at 4pm, but it rose to 170 euros at 9pm. So it goes on, day after day, with increasing frequency. More sun and more wind means more power generation and therefore lower prices. A vicious circle that is causing the closure of projects due to their lack of profitability.
In March last year the sum of renewable projects in operation and in the pipeline reached an output of 172 GW. One month later, the figure had fallen to 163.1 GW, according to REE data. A sustained fall that reflects the internal pressure of the sector itself. "Because it is better to keep producing than to stop," stated industry sources. All projects are constantly injecting energy into the grid, prices are plummeting and calculating real profitability is becoming an increasingly complex ask.
Even projects with long-term power purchase agreements (PPAs) are being affected. In 2023 these agreements were locked for ten years with prices above 40 euros/MWh. Today, they are below 30.
New dark clouds are hanging over the industry beyond that of price volatility: a full-scale admin review and inventorising of renewable projects. Already on the table are 1,700 photovoltaic projects with the green light to begin construction, to which must be added another 115 GW that have access and connection permits, or are applications in progress or applications pending submission.
The imminent fallout affects around 10% of these 115 GW. According to industry estimates, some 10,000 MW with access granted by Red Eléctrica Española and not yet up and running could lose their viability as of next summer, when the deadline set by royal decree-law 23/2020 expires. This regulation granted five years to get such projects up and running due to administrative bottlenecks. That deadline expires on 25 June, and many projects have stagnated with little, real progress.
The fallout is not limited to the energy sector alone as it also threatens the financial sector. The cancellation of these projects would leave credit lines of over four billion euros unpaid. From large listed companies to small entrepreneurs, the entire renewable ecosystem is anxiously awaiting the arrival of the summer solstice.
The sector criticises the silence from central government, which is not reacting to the approaching date. Experts, for their part, consider that it is necessary to clean up the projects and rethink the way in which these licences are granted, which in their early years were used as a bargaining chip to heat up industry speculation. Now, hundreds of millions in investment are up in the air.
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