Too much of a good thing? Green energy in Spain could exceed demand

The plains of Castilla-La Mancha, in central Spain, were once known for their windmills.

But now wind turbines, their modern-day counterparts, are becoming more visible on the region's skyline.

The Sierra del Romeral's 28 massive turbines, located in the hills not far from the historic city of Toledo, overlook this landscape.

It is run by Spanish company Iberdrola, and is part of a trend that has accelerated renewable energy production in Spain over the past half-decade, making the country a major presence in the industry.

Spain's total wind power generation capacity, the main source of renewable energy in recent years, has doubled since 2008. Solar power capacity, on the other hand, has increased eight-fold over the same period.

This makes Spain a member state of the European Union The second largest Renewable energy infrastructure, after Sweden in first place.

Earlier this year, Spain's Socialist Workers' Party Prime Minister, Pedro Sanchez, described his country as a “driving force for the energy transition on a global scale.”

The boom began shortly after the arrival of a new government headed by Sánchez in 2018, with regulatory barriers removed and subsidies for the installation of renewable energy. The pandemic has accelerated this trend at the local level.

“The impact of Covid has been very positive on our sector,” says José Donoso, CEO of UNEF, the Spanish photovoltaic association, which represents the solar panel sector. “People saved money, took time to think about what to do with it, and many decided it was better to invest it on their roofs than in their banks.”

At the same time, the government has introduced ambitious new targets, including covering 81% of Spain's electricity needs with renewable energy sources by 2030.

However, behind this success story, there are concerns within the electricity industry caused by an imbalance between supply and demand, with electricity sometimes in surplus.

Although the Spanish economy has rebounded strongly from the shock of the Covid pandemic, and is growing faster than all other major economies in the bloc, electricity consumption has declined in recent years.

Last year, electricity demand was even lower than what we saw in the pandemic year 2020, and the lowest since 2003.

“What we saw until 2005 is that when GDP increased, demand for electricity increased more than GDP,” says Miguel de la Torre Rodriguez, head of system development at Red Electrica (REE), the company that runs Spain's national grid. .

More recently, he says, “We've seen that demand increases less than GDP. What we're seeing is a decoupling of energy intensity from the economy.”

There are several reasons for the recent decline in demand. They include the energy crisis caused by the Russian invasion of Ukraine in 2022, which has caused businesses and homes across Europe to reduce their consumption.

Energy efficiency has also improved and become more popular.

The increasing use of renewable energy has also contributed to reducing demand for electricity from the national grid.

During daylight hours, when solar production is particularly strong, the balance of supply and demand can get out of balance, affecting prices, Rodriguez says.

“Since the power system must always be in balance — demand must equal generation — it means there was excess generation during those hours,” he says.

“This has led to lower prices, especially during certain hours, when prices were zero or even negative.”

While these low prices are welcome for consumers, they may pose a problem when it comes to attracting investment into the industry.

“This could make it more difficult for investors to invest more in new renewable electricity,” says Sara Pezzinato, a renewable energy expert at Greenpeace Spain.

“This could be a bottleneck to the energy transition.”

Concerns about a surplus of electricity in Spain have led to discussion of the need to accelerate the “electrification” of the economy, which includes moving it away from fossil fuels. The Sanchez government has set a goal of making 34% of the economy dependent on electricity by 2030.

“This process is going slowly, and we need to speed it up,” says José Donoso of the UN Emergency Force.

“Electricity is the cheapest and most competitive way to produce clean energy.

“We need facilities that use electricity instead of fossil fuels.”

A shift to complete reliance on electricity is seen as unrealistic, as some important sectors such as chemicals and metals will find this shift difficult.

However, Donoso and others see plenty of scope for faster electrification. For example, Spain lags behind many of its European neighbors when it comes to installing heat pumps in homes, and the use of electric cars, which make up only about 6% of vehicles on the road.

Ms. Pezzinato agrees that electricity is crucial, but says there are other ways to address the supply-and-demand impasse, including phasing out the use of nuclear plants more quickly and increasing capacity for energy storage.

“We need to get more people and more industries involved in demand-side management, to make sure that the necessary flexibility in the system is in place to make generation and demand better match during the day and during the night,” she says.