Spanish storage investment to ease oversupply of renewables

• Spanish renewable capacity is set to rise drastically between 2024 to 2050
• In times of surplus supply and low demand frequent negative prices have occurred, raising investor concerns
• Spain is investing €160 million in energy storage to stabilize and sustain renewable growth

LONDON (ICIS)–Spain should prioritize investing in energy storage to prevent market volatility and balance surplus supply.

With low Spanish demand levels for power and ample renewable power production, there needs to be more storage capacity to ensure negative prices are managed.

RENEWABLES BOOM

The country aims to achieve national climate neutrality by 2050, targeting 100% renewable energy in the electricity mix, the International Energy Agency shows.

In the Spanish national recovery and resilience plan the country dedicates 39.7% of its goals to the ‘green transition,’ funded partly by €58 million from the Brexit adjustment reserve. The EU’s long-term strategy also supports this regional goal of achieving net-zero emissions by 2050.

Renewable capacity in Spain is forecast to grow from 98.3GW in 2024 to 209.2GW by 2050 according to ICIS Analytics.

MARKET VOLATILITY

Demand is not expected to keep in pace with the growth in Spanish renewable supply, according to ICIS Analytics.

If supply of electricity is to continue to exceed demand levels in coming years, the likelihood of negative prices occurring could remain.

A trader active within the Spanish power market told ICIS that so far in 2024 there have been 671 hours of null or negative prices, of which a third are negative with minimums reaching -€2.00/MWh in June. In comparison to 2022, where the market only had 3 hours of negative or null prices.

Balancing mechanisms such as storage will play a key role in managing this imbalance.

ICIS Analytics shows that Spanish battery storage capacity is expected to rise from 1.2GW in 2024 to 9.8GW in 2050.

FUTURE FOCUS

Investors are increasingly concerned about market volatility, as negative prices deter further investments in renewable projects.

To address these challenges, the Spanish government is investing €160 million in grants for energy storage projects, aiming to bring 600MW of storage online by 2026.

ICIS Analytics predicts that batteries will begin to make a small presence in Spanish capacity from 2024 with 1.9GW, however total supply is expected to continue to overpower demand through till 2050.

Spanish interconnector capacity is set to begin to grow steadily from 2028 onwards, according to ICIS Analytics. In 2024, there is an upcoming project on the connection between Spain and Portugal, to update capacity to 5GW. Following this, in 2033 a 1.8GW interconnection will be join Spain with UK. Both projects will enable surplus energy to be sent to neighbouring regions.

A suggested solution is electrification with the Sanchez government setting a target of making 34% of the economy reliant on electricity by 2030 to increase demand. However, concerns continue to rise due to fear that the pace of electrification and energy consumption may not keep up with the growth in renewable energy generation.