The boom in renewable energy generation now faces a physical limit: the capacity of electrical networks to distribute them. Future-proofing such networks is vital to ensuring energy security and decarbonization success. Europe has established ambitious objectives in both areas. Among them, the requirement that at least 42.5% of electricity come from renewable sources in 2030 and the need to achieve climate neutrality in 2050. The European Commission defends that, to achieve both objectives, we must accelerate the deployment of renewables and the electrification of the economy.
Spain is an advantaged student in the first aspect, if it is confirmed that this year we will reach 50% renewable generation, as anticipated by Red Eléctrica. But to ensure that this new clean energy can be distributed, it is necessary to adapt the infrastructure. In a recent opinion piece published in the Financial Times, European Energy Commissioner Kadri Simson argued that “our 11 million kilometers of networks must grow and change to meet expanding demand. “Electricity consumption is expected to increase by approximately 60% until 2030.” According to Simson, this requires that networks integrate a large proportion of renewable energy that is characterized by being intermittent; and that they adapt to a more decentralized electricity system, with millions of solar panels on roofs and electric vehicles, with electrolyzers that produce green hydrogen and with local energy communities that share resources. The commissioner also warns of probable bottlenecks: “Today, renewable projects can face long waits to connect to the grid. Obtaining permits to reinforce it can take up to ten years.”
Uncertainty about connection deadlines or costs can cause generation projects to end up being abandoned. “Renewable energy plants are frequently penalized. Solar panels are often the first technology to go offline when the grid becomes overloaded, because they are flexible and easy to manage. “It is an expensive waste,” he adds. WindEurope, the European wind energy association, for its part, has pointed out that grid connections are slowing the expansion of renewables. In Spain alone, more than 100 GW of such energy projects are awaiting connection to the grid. The European Union plans to install around 30 GW of new wind energy per year until 2030, but in 2022 only half of this amount will be installed. To this we must add another drawback in our country: the fact that renewable electricity is being wasted because generation is decoupled from the transportation network.
The reason is that the Spanish electricity transmission system has not grown or transformed at a rate comparable to the increase in renewable generation capacity. There are areas where local transmission and distribution networks do not have the capacity to deliver the available energy to consumers, which leads to the extreme of causing generation to be stopped or resorting to solar and wind energy discharges, in which essentially waste the electricity generated. According to Aurora Energy Research, these discharges increased more than ten times in 2022, compared to 2021. This phenomenon has added about 1.3 billion euros to the total costs of the Spanish electricity system, which consumers have had to bear, which is equivalent to 68 euros per household.
According to the consulting firm, discharges will increase as long as there is no planning and financing to alleviate network restrictions. It is necessary to strengthen and digitalize transport and distribution networks, as well as build new infrastructures capable of responding to this growing and changing demand. The European Union Action Plan, published at the end of 2022, already estimated that it would be necessary to invest around €584 billion in electricity networks by the end of 2030, of which around €400 billion would be allocated to the distribution network. In Spain, the new National Integrated Energy and Climate Plan (PNIEC) foresees, for the period 2023-2030, investments in networks of 52,920 million euros. It is a high figure, and represents around 18% of the total investments of the decade. However, the electricity sector believes that it falls short. The European employers' association Eurelectric calculates that, as a general rule, 0.67 euros should be invested in the network for every euro invested in generation capacity, very far from the current 0.30 euros and also from the 0.45 euros that the new roadmap that establishes the latest revision of the PNIEC.
In any case, these figures from the new PNIEC are unattainable given the limits to growth imposed by the current regulation of transportation and distribution activities. In 2013, still in the midst of the economic crisis and with the aim of controlling costs, the Government of Mariano Rajoy limited the annual volume of investment in both activities to a growth of no more than 0.065% of GDP for transport and 0.13% for the distribution. Pedro Sánchez's Executive has maintained them—with the exception of the pandemic years—despite the fact that his economic formula has focused on expanding spending to stimulate growth. In fact, the investments provided for in the new energy plan can become a toast to the sun if the current legislation is not changed, as has already happened with the PNIEC in force (2021-2030), which marks annual investments in distribution of 3,000 million euros, when regulations limit them to 2,000 million, according to calculations by Foro Mercado Libre.
*Benito Arruñada is a professor at the Pompeu Fabra University, 'Affiliated Professor' at the BSE, an associate researcher at FEDEA and coordinator of the Mercado Libre Forum.
