Two years ago, the war in Ukraine shot up the price of energy on the wholesale market to values that exceeded 200 euros per megawatt hour (MWh). Yesterday Sunday, while Iran was attacking Israel and the warning of a new conflict was resounding all over the planet, in Spain between 3 pm and 5 pm this price was negative 1.01 euros. The lowest price in its history.
What has happened this period, for the benefit of end customers, is the massive implementation of renewable energy projects and favorable weather conditions. The marginal market that used to make consumers despair has now become the ogre of producers, especially those of solar energy, who find it increasingly difficult to make projects profitable.
These negative prices, which have been increasingly prominent for a few months, are the tip of the iceberg of a downward price trend that, according to businessmen in the sector, may even endanger the dream of Spain becoming an energy exporting power.
Since the beginning of the year alone, the average price of electricity in the wholesale market has fallen 53%, according to a study of the evolution of hourly prices by APPA Renovables, with data from OMIE between January 1 and April 10.
The employers' association of renewable companies points out that during the central hours of the day, when zero or negative prices are most often recorded, the average is approximately 30 euros MWh, while the maximums are slightly more than 70 euros at the peak of the afternoon. The drop in prices reaches over 60% in the early hours of the morning. The figures are far from last year's average of 87.1 euros per MWh, and even more than the 167.52 euros per MWh recorded in 2022.
"We have a hydroelectric production well above normal due to the heavy rains in a large part of Spain; wind power also works very well as a result of the storms, and photovoltaics has incorporated a lot of power in a short time", comments the analyst of the ASE group, Juan Antonio Martínez, to explain the current situation.
Along with the weather conditions, there is the increase in renewable supply. In 2023 alone, Red Eléctrica Española counts 6,300 megawatts (MW) of new green energies added to the system, almost 5,600 MW of which correspond to photovoltaic solar technology. In addition, it is necessary to add the self-consumption boom in both 2022 and 2023 and the 2,500 projects with more than 100,000 MW that received authorizations last year.
Many of these projects still struggle with bureaucratic hurdles and costs, such as guarantees, which make it even more difficult to achieve the expected profitability.
"We are witnessing an absolute oversupply that could collapse the electricity system. The Spanish Government must be bold, extend deadlines so that all the projects that are planned enter the system in a more orderly manner", warns Fernando Lacaci, X-Elio's head of operations.
Lacaci adds to the general call made by the sector this week at the Energyyear 2024 meeting held in Madrid. "I don't know if with this legislative framework there will be consumers for the renewable objectives set by the National Integrated Energy and Climate Plan", explained Carlos Relancio, director of renewable energy at Galp. At the moment, there is none.
The escalation of prices after the war and the daring campaigns in favor of savings have borne fruit. "Consumers have implemented all possible efficiency measures and self-consumption has skyrocketed. This explains, together with the fall in industrial demand, the decline in consumption", explains Jon Macías, president of APPA Autoconsum. In the case of self-consumption, what is affected are the facilities that were designed with surplus remuneration in mind, which is now low or non-existent. "For the rest, the amortization is delayed by two or three years, but since they last more than 30, it's not a problem," says Macías.
Christina Rentell, energy specialist for the Peninsula of the consulting firm Aurora Energy Research, says that this situation will last. "The generation that is installed has little flexibility, there are no storage systems and there is no forecast that demand will increase", he analysed.
In his opinion, photovoltaic projects are the ones most at risk because they are the ones that generate the most energy when prices are lowest. "I think there will continue to be investor interest in Spanish companies, but perhaps a more extended analysis of the business plan will be done", comments Rentell. "Companies that have a balanced portfolio and that minimize exposure to market risk will still provide a lot of value," he adds.
But it's not just photovoltaics that are calling for change. "It is no longer a question of looking for cheap prices, it is necessary to look for a legislative and business model that ensures the demand for both photovoltaics and wind power as well as hydrogen. The Spanish Government must give weight to industrial plants to consume renewables if it wants to sustain the system. Otherwise, all bets can be dangerous", warns José Luis Moya, CEO of Ric Energy.
Along with this industry boost that is already there, managers such as Leonardo Moreno, director of Solarpack, insist on the need to promote batteries, reducing the guarantees that the administration now requires, and sell Spain as the perfect destination for to data centers (consumers of 5% of global energy demand) and promote hydrogen and ammonia projects that attract international industry.
