Spain, and the rest of Europe are undergoing profound changes in its energy model and are on the right path achieve climate neutrality by 2050. This is both a major challenge and opportunity for a country without fossil fuels which had to import them. However as regards renewable resources that are crucial to beat the competition in the coming decades, Spain has been in a better position than most of its partners. The country does not have fossil resources but a great deal of sun and wind.

The path in this paradigm change is marked by the objectives that have been set at European level: 2030 and 2050. As regards de-carbonisation of the electric system, the objective is an ambitious one. The aim is to reach 74% renewable electricity in 2030, e.g. 3/4, based on photovoltaic and wind energy, two technologies and resources where Spain is highly competitive. However, this brings technical difficulties with it given the need to have daily cycle storage systems in place like batteries and longer cycle storage systems such as adjustable hydroelectric systems or to increase the interconnections in order to offset changes in the production of renewable energy in some regions of Europe. Such technologies should enable a reduction in the average cost of Spanish electric generation when compared to the average cost of its European competitors.

But, in order to achieve this the country needs to invest also in energy efficiency. One of the pending tasks is to increase the electrification of energy consumption. Spain cannot pursue with full de-carbonisation if electricity keeps accounting only for 25% of energy consumption. It should therefore increase its weight of this type of energy in the fields of transportation, industrial activity and heat and cold systems of buildings. Otherwise it will prove difficult to de-carbonise those sectors where fossil fuels are deeply rooted. Furthermore, there is also the problem of the aforementioned bad interconnection. The Iberian Peninsula is still an electric island and its level of interconnection with the European system is much lower than in the rest of the EU countries, thus preventing equal conditions as regards taking advantage of electric interconnections.

Next GenerationEU funds are a key element in the energy transition, after the recovery plan devised by the Spanish Government allocated 40% of these funds to energy transition, housing renovation, vehicle charging network and self-consumption, among others. These funds are expected to speed up the adoption of energy transition technologies that have not yet reached their level of full competitiveness and which, with these grants, can now become profitable and start being implemented. See, for example, green hydrogen or battery storage. Funds that should help bring green technologies to customers and attract private investment towards this transition.

Along the way, Spain has witnessed an unexpected rise in the price of electricity in the wholesale market, which at some point exceeded EUR 200 / MWh. Despite being a temporary increase, caused mainly by CO2 emission rights and the high price of gas, this invites us nonetheless to reduce our dependency on both factors. “Gas should keep playing a fundamental role in the electricity sector for some more years to more. If we want to reduce its impact on prices, we must choose another market model. We need to perform a structural reform of the electricity sector given our vulnerability to gas price increases,” says Natalia Fabra, professor in the Department of Economics at the Carlos III University.

While the Spanish Government has taken its own measures to minimize the effect of this increase on consumers (it has one of the highest bills due to the heavy tax burden), it also asked Brussels to take action on this matter and to establish strategic reserves. “Europe’s strategic autonomy is incompatible with the current level of exposure to fluctuations in international energy markets. We have already done this successfully with vaccines and we should replicate this model in other strategic fields like this one in particular” reads a document sent to Brussels.

We cannot forget that the electrical system has a great inertia, particular as regards many investments in existing assets that shape the way we produce and consume energy in the next decades. Hence, experts call for work to be done in anticipation in order to change the way we produce and consume energy.